USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a substitution swap. You currently hold a 25-year, Aa 10-percent coupon bond priced to yield 12 percent. As a swap candidate, you are considering a 25-year, Aa 10 percent coupon bond priced to yield 13 percent. Assume a reinvestment rate of 12 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.9. The dollar investment in the candidate bond is
A) $1515.36.
B) $853.50.
C) $780.46.
D) $779.13.
E) $877.53.

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a substitution swap. You currently hold a 25-year, Aa 10-percent coupon bond priced to yield 12 percent. As a swap candidate, you are considering a 25-year, Aa 10 percent coupon bond priced to yield 13 percent. Assume a reinvestment rate of 12 percent, semiannual compounding, and a one-year workout period.
 
-Refer to Exhibit 13.9. The dollar investment in the candidate bond is
A) $1515.36. 
B) $853.50. 
C) $780.46. 
D) $779.13. 
E) $877.53.

Quizplus · Accepted Answer

The Answer of USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a substitution swap. You currently hold a 25-year, Aa 10-percent coupon bond priced to yield 12 percent. As a swap candidate, you are considering a 25-year, Aa 10 percent coupon bond priced to yield 13 percent. Assume a reinvestment rate of 12 percent, semiannual compounding, and a one-year workout period.
 
-Refer to Exhibit 13.9. The dollar investment in the candidate bond is
A) $1515.36. 
B) $853.50. 
C) $780.46. 
D) $779.13. 
E) $877.53.