What is the present value of a $15,000 face value STRIPS with 8 years to maturity and a yield to maturity of 5.25%?
A)$6,615.12
B)$9,723.86
C)$9,909.24
D)$9,960.00
E)$12,191.75

Question

Quizplus · Accepted Answer

The present value of a STRIPS can be calculated using the formula:
PV = FV / (1 + r)^n
where:
PV = present value
FV = face value
r = yield to maturity
n = number of years to maturity

Substituting the given values, we get:
PV = 15,000/(1+0.0525)^8
PV = $9,909.24

Therefore, the best choice is C, with a present value of $9,909.24.

What Is the Present Value of a $15,000 Face Value