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The following information is given concerning a pure yield pick-up swap: You currently hold a 10 year, 7 percent coupon bond priced to yield

  

The following information is given concerning a pure yield pick-up swap: You currently hold a 10 year, 7 percent coupon bond priced to yield 8 percent. As a swap candidate you are considering a 10 year, 8 percent coupon bond priced to yield 9 percent. Assume a reinvestment at 9 percent, semiannual compounding, and a one-year workout period. Dollar Investment Coupon i on One Coupon Principal Value at Year End Total Accrued Realized Compound Yield Current Bond $932.05 $70.00 Candidate Bond $934.96 $1.575 ? $936.70 ? 8.018% $1008.28 ? ? $80.00 What is the interest on one coupon for the candidate bond? What is the realized compound yield on the candidate bond? What is the value of the swap (basis points in one year)?

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