Show all work. Evaluate the following substitution swap: You currently hold a 25-year, 9.0 percent coupon bond priced to yield 10.5 percent. As a swap candidate, you are considering a 25-year, AA-rated, 9.0 percent coupon bond priced to yield 10.75 percent. (Assume a one-year work-out period and reinvestment at 10.5 percent.) Original par value of bond was $1000

Current Bond Candidate Bond

Dollar investment _________ _____________

Coupon ________ ___________

i on one coupon __________ __________

Principal value at year end _______ _________

Total accrued _________ ________

Realized compound yield ________ ___________

Value of swap:______ basis points in one year