The Web site www.investinginbonds.com has several publications that are designed for the individual investor. The text describes bond swap strategies in the section on active bond management. This Web site offers a guide for employing bond swapping strategies. After you have read the short pamphlet on swapping strategies, answer the following questions.

1. What potential benefits may be found from swapping?
2. What strategy would you employ if you believed that interest rates were going to fall?
3. What is a wash sale and how can you avoid wash sales?

Many bond calculators are offered on the Web. www.ficalc.com is a Web-based fixed-income calculator that uses a question-and-answer approach. Once at the site, select "use calculator." Indicate that you plan to evaluate U.S. Corporate Securities and Bond-Fixed Coupon. Prior to entering the data for a particular bond, set the calculations to mark all available calculations.
For this problem, we will use a 10-year maturity bond that is selling at par value as the base case. The data are entered as follows:
Prices are entered assuming par value of 100.
Coupons are entered in whole figures as a percentage.
The maturity is entered as Month/Day/Year (e.g., 03/10/2015).
The default setting assumes semiannual coupons, but may be changed.

1. Select a bond from the most actively traded corporate bond list at www.investinginbonds.com.
2. Enter the relevant information for the selected bond.
3. Allow FiCalc to calculate the relevant statistics for the bond. The calculator has a printer formatting option if you want a hard copy of the results.
4. Repeat this process for a price of 87, 100 and 113. Then, answer the following questions:
   1. What are the duration, convexity, and interest on interest calculations for the bond at the base price of 100?
   2. Do you earn more or less interest on interest when the price of the bond is 113 compared to the base case? Why?
   3. Is the bond price more or less sensitive to interest rates at a price of 87? Compare to the base case. Does the bond have a higher or lower level of convexity at this price?