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 maturity

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

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 .0%. As a swap candidate, you are considering a 20-yearn AA-rated, 1 1% coupon rate bond with yield to maturity of 11.5%, assume reinvestment rate is 1 1.5% 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. Current Bond Candidate bond Dollar investment Coupon on one coupon Principal value at year end Total accrued Realized compound vield Value of swap: basis point in one year

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