Treasury STRIPS are
A) securities issued by the Treasury with very long maturities.
B) extremely risky securities.
C) created by selling each coupon or principal payment from a whole Treasury bond as a separate cash flow.
D) created by pooling mortgage payments made to the Treasury.

Question

Quizplus · Accepted Answer

Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) are created by separating the interest payments and the principal repayment of a Treasury bond into individual securities. Each of these parts is sold separately as a zero-coupon bond, with no intermediate interest payments and its value solely based on the difference between the purchase price and the eventual payout at maturity. This process allows investors to invest in a specific component of a Treasury bond's cash flows.

Treasury STRIPS Are