Exhibit 16-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Exhibit 16-5
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 2% coupon bond priced to yield 9.5%. As a swap candidate you are considering a 20 year, Aa 14% coupon bond priced to yield 10.00. Assume a reinvestment rate of 11%, semiannual compounding, and a one-year workout period. $\begin{array}{lcc}&\text { Current Band } & \text { Candidate Band } \\\hline\text { Dollar Investment } & \$ 1222.04 & \$ 1343.18 \\\text { Coupon } & 110.00 & 140.00 \\\text { i on One Coupon } & 3.3 & ? \\\text { Principal Value at Year End } & 1218.04 & ? \\\text { Total Accrued } & 1341.34 & ? \\\text { Realized Compound Yield } & 9.5351 \% & ?\end{array}$

-Refer to Exhibit 16-5. The value of the swap is ____ basis points in one year

A) 0.004921
B) 0.4921
C) 4.921
D) 49.21
E) 492.1