Exhibit 16-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 8

Multiple Choice

Exhibit 16-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a 20 year, Aa 8% coupon bond priced to yield 10%. As a swap candidate you are considering a 20 year, Aa 10% coupon bond priced to yield 10.75%. Assume a reinvestment rate of 12.00%, semiannual compounding, and a one-year workout period. $\begin{array}{lcc}&\text { Current Band } & \text { Candidate Band } \\\hline\text { Dollar Investment } & \$ 828.41 & \$ 938.83 \\\text { Coupon } & 80.00 & 100.00 \\\text { i on One Coupon } & 2.4 & ? \\\text { Principal Value at Year End } & 831.32 & ? \\\text { Total Accrued } & 913.72 & ? \\\text { Realized Compound Yield } & 10.5547 & ?\end{array}$
-Refer to Exhibit 16-3. The interest on one coupon for the candidate bond is

• A) $2.40
• B) $2.75
• C) $9.60
• D) $11.00
• E) $50.00

---

Definitions:

Oil Pollution

The release of liquid petroleum hydrocarbons into the environment, particularly the marine ecosystem, due to human activity, leading to environmental damage.

Salt Marshes

Coastal ecosystems in the intertidal zone, characterized by salt-tolerant plants and a major hub for biodiversity.

Oil Decomposition

The natural or chemically-induced breakdown of oil substances, leading to their transformation into simpler compounds over time.

Oil Pollution

Contamination of the natural environment, particularly water bodies, with petroleum products which cause damage to wildlife and ecosystems.