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You bought a STRIP at 96 dollars with maturity of 3 years. Calculate the yield to maturity of this STRIP _______% (keep two decimal points)

User RodolfoAP
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Final answer:

The yield to maturity (YTM) of the STRIP purchased for $96 with a maturity of 3 years is 4.17%.

Step-by-step explanation:

To calculate the yield to maturity (YTM) of a bond, you need to consider the bond's purchase price, maturity date, and coupon rate. In this case, you bought the STRIP (Separate Trading of Registered Interest and Principal Securities) for $96 with a maturity of 3 years. Since STRIPs pay no interest but are sold at a discount to their face value, the formula to calculate the YTM is:

YTM = (Face Value - Purchase Price) / Purchase Price x (1 / Time to Maturity)

Using this formula, the calculation would be: YTM = (100 - 96) / 96 x (1 / 3) x 100 = 4.17%

User Poovizhirajan N
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