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can you help me with the formulas because i dont know where the answer comes from Q5 The following information pertains toa substitution swap You
can you help me with the formulas because i dont know where the answer comes from
Q5 The following information pertains toa substitution swap You currently hold Aa coupon bond with Holding period 25 years Coupon rate 8% Yield (%) 10% As a swap candidate, you are considering Aa bond with 25 years Holding period 8% Coupon rate Yield (%) 10.50% Assume a reinvestment rate of 10% Compounded 2 times per year one-year workout period Candidate Current Bond Bond Dollar investment $817.44 Coupon 80 80 2.2 2. r on one coupon Principal value at year end Total accrued 819.23 782.33 901.23 864.53 Total gain 83.79 Gain per invested dollar Realized compound yield Current price: PO 40 (PVIFAr/2, 2n) + 1,000* (PVIFr/2, 2n) P current - 40*(18.2559)+ 1,000 (.0872) 817.44 P candidate 40 (18.5728) + 1,000* (.0774) 780.34 Q5 The following information pertains toa substitution swap You currently hold Aa coupon bond with Holding period 25 years Coupon rate 8% Yield (%) 10% As a swap candidate, you are considering Aa bond with 25 years Holding period 8% Coupon rate Yield (%) 10.50% Assume a reinvestment rate of 10% Compounded 2 times per year one-year workout period Candidate Current Bond Bond Dollar investment $817.44 Coupon 80 80 2.2 r on one coupon Principal value at year end Total accrued 819.23 782.33 901.23 864.53 Total gain 83.79 Gain per invested dollar Realized compound yield Current price: PO 40 (PVIFAr/2, 2n) + 1,000*(PVIFr/2, 2n) P current 40*(18.2559)+ 1,000 (.0872) 817.44 P candidate 40 (18.5728) + 1,000* (.0774) 780.34Step by Step Solution
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