Exhibit 16-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 63

Multiple Choice

Exhibit 16-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The following information is given concerning a substitution swap: You currently hold a 15 year, 7% coupon bond priced to yield 8%. As a swap candidate you are considering a 15 year, 7% coupon bond priced to yield 8.5%. Assume a reinvestment rate of 8.5%, semiannual compounding, and a one-year workout period. $\begin{array}{lcc}&\text { Current Band } & \text { Candidate Band } \\\hline \text { Dollar Investment } & \$ 913.54 & ? \\\text { Coupon } & 70.00 & 70.00 \\\text { i on One Coupon } & 1.487 & 1.487 \\\text { Principal Value at Year End } & 916.68 & 878.55 \\\text { Total Accrued } & 988.17 & 950.04 \\\text { Total Gain } & 74.63 & ? \\\text { Gain per Invested Dollar } & ? & ? \\\text { Realized Compound Yield } & ? & ?\end{array}$
-Refer to Exhibit 16-2. The realized compound yield on the current bond is

• A) 15.50%
• B) 11.03%
• C) 10.30%
• D) 8.01%
• E) 9.00%

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Definitions:

Hue

The dimension of color that is determined by the wavelength of light; what we know as the color names blue, green, and so forth.

Brightness

A perception attribute of visual experience in which a source appears to emit or reflect a high level of light.

Color

A property of light as seen by people, resulting from the way objects absorb and reflect various wavelengths of light, interpreted by the eye and brain.

Brightness

Brightness is the perception of how light or luminous an object or light source appears to the human eye.