Question: Problem 2 (20 points): Evaluate the following pure-yield pickup swap: You currently hold a 20- yearm AA-rated, 9% coupon rate bond with yield to

Problem 2 (20 points): Evaluate the following pure-yield pickup swap: You currently

Problem 2 (20 points): Evaluate the following pure-yield pickup swap: You currently hold a 20- yearm AA-rated, 9% coupon rate bond with yield to maturity of 11.0%, and face value $1,000. As a swap candidate, you are considering a 20-yearm AA-rated, 11% coupon rate bond with yield to maturity of 11.5%, assume reinvestment rate is 11.5% and coupon are paid semi- annually, please fill out the table below and you must show (explain) clearly how numbers in the table are obtained. Dollar investment Coupon i on one coupon Principal value at year end Total accrued Realized compound yield Value of swap: Current Bond Candidate bond basis point in one year

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