Question

A.) What is the price of a Treasury STRIPS with a face value of $100 that matures in 12 years and has a yield to maturity of 6.5 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

B.)  A Treasury STRIPS is quoted at 93.333 and has 4 years until maturity. What is the yield to maturity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)  

Answer 1

Treasury STRIPS is same as zero coupon bond :

A) Face Value = $100, Maturity = 12 years, YTM = 6.5%

Calculate price of a Treasury STRIPS using below formula :

Here,

PV = Present value of bond

PVF = Present value factor

FV = Face value of bond

= 0.4696

= 46.97

YOU CAN ALSO CALCULATE USING FINANCIAL CALCULATOR OR SPRADE SHEET :- USE BELOW INPUTS :-

Variable	Value
FV	$100
N / NPER	12
I/Y	6.50%
CPT PV	-$46.97

B) PV = 93.333, Maturity = 4 years, FV (Assume) = 100

Calculate YTM of a Treasury STRIPS using below formula :

= 0.0174 or 1.74%

YOU CAN ALSO CALCULATE USING FINANCIAL CALCULATOR OR SPRADE SHEET :- USE BELOW INPUTS :-

Variable	Value
FV	$100
N / NPER	4
PV	-$93.333
CPT I/Y	1.74%