USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Multiple Choice

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 8 percent coupon bond priced to yield 10 percent. As a swap candidate you are considering a 25-year, Aa 8 percent coupon bond priced to yield 10.50 percent. Assume a reinvestment rate of 10 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.7. The value of the swap is ____ basis points in one year.

A) 26.91
B) 26.25
C) 31.25
D) 41.25
E) 51.25