Question

What is the price of a STRIPS with a maturity of 10 years, a face value...

What is the price of a STRIPS with a maturity of 10 years, a face value of $10,000, and a yield to maturity of 6.4 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price of a STRIPS

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Answer #1
Price of STRIPS is the present value of cash flow.
Present value of cash flow = Face value * Discount factor
= $       10,000 * 0.537754
= $   5,377.54
So,
Price of STRIPS is $ 5,377.54
Working:
Discount factor = (1+i)^-n Where,
= (1+0.064)^-10 i 6.40%
= 0.53775409 n 10
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