63.1k views
0 votes
You buy a principal STRIP maturing in five years. The price quote per hundred of par for the STRIP is 75.75 percent. Using semiannual compounding, what is the promised yield to maturity on the STRIP

1 Answer

2 votes

Answer:

5.64%

Step-by-step explanation:

In this question we use the RATE formula that is shown on the attachment

Kindly find it below:

Given that,

Present value = $75.75

Assuming figure - Future value or Face value = $1,000

PMT = 0

NPER = 5 × 2 = 10 years

The formula is shown below:

= Rate(NPER;PMT;-PV;FV;type)

The present value come in negative

So, after solving this, the yield to maturity is

= 2.82% × 2

= 5.64%

You buy a principal STRIP maturing in five years. The price quote per hundred of par-example-1
User Peter Toth
by
4.7k points