Finance Assignment | Professional Writing
Question 4 (10 marks) Below are hypothetical prices and maturities of STRIPs, which are zero-coupon bonds that pay $100 at maturity. The prices are quoted in 32nds. Maturity 3 months 98:20 9 months 95:19 Price (a) (b) Calculate annualized bond-equivalent yields for each STRIP.
(4 marks) Imagine that there is a Treasury coupon bond, issued 9 4 years ago, that matures in nine months. The coupon is 82 percent, paid semiannually. What price should the bond have to be consistent with the STRIPs prices above? (Calculate the total price, including accrued interest.) (6 marks)
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