You just purchased a 5-year STRIPS security that was created from a 30-year T-bond. How many payments will you receive?

Question

Quizplus · Accepted Answer

STRIPS (Separate Trading of Registered Interest and Principal of Securities) are zero-coupon securities created from the coupon and principal payments of Treasury bonds. Since they do not make periodic interest payments and you purchased a STRIPS created from the principal of a T-bond, you will receive a single payment at maturity, which is at the end of the 5-year period.

You Just Purchased a 5-Year STRIPS Security That Was Created