Exhibit 16-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Exhibit 16-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a 20 year, Aa 8% coupon bond priced to yield 10%. As a swap candidate you are considering a 20 year, Aa 10% coupon bond priced to yield 10.75%. Assume a reinvestment rate of 12.00%, semiannual compounding, and a one-year workout period. $\begin{array}{lcc}&\text { Current Band } & \text { Candidate Band } \\\hline\text { Dollar Investment } & \$ 828.41 & \$ 938.83 \\\text { Coupon } & 80.00 & 100.00 \\\text { i on One Coupon } & 2.4 & ? \\\text { Principal Value at Year End } & 831.32 & ? \\\text { Total Accrued } & 913.72 & ? \\\text { Realized Compound Yield } & 10.5547 & ?\end{array}$
-Refer to Exhibit 16-3. The value of the swap is ____ basis points in one year

A) 40.4
B) 60.6
C) 80.8
D) 20.5
E) 100.1