Final answer:
The price of a Treasury STRIPS with a 9-year maturity and a 4.9% yield to maturity is $65,765.31. The quoted price is 65.765% of the par value.
Step-by-step explanation:
The price of a Treasury STRIPS can be determined by discounting the par value to present value using the yield to maturity. Since the Treasury STRIPS matures in 9 years with a par value of $100,000 and has a yield to maturity of 4.9%, we can use the present value formula to find the price.
The formula for the present value of a zero-coupon bond like STRIPS is PV = F / (1 + r)^n, where PV is the present value, F is the face value of the bond, r is the yield to maturity (expressed as a decimal), and n is the number of years until maturity.
In this case, we have:
PV = $100,000 / (1 + 0.049)^9
PV = $100,000 / (1.049)^9
PV = $100,000 / 1.52006
PV = $65,765.31
This is the price of the Treasury STRIPS. The quoted price is typically the price as a percentage of the par value. Therefore, the quoted price would be:
Quoted Price = (Price / Par Value) * 100
Quoted Price = ($65,765.31 / $100,000) * 100
Quoted Price = 65.765%
Note: This calculation assumes that the yield to maturity remains constant and compounding occurs once a year.