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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 8
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. - 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)? 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. - 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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