A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8844.

Name: A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8844.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The price of the bond can be calculated using the formula:Price = Face value / (1 + Yield/2)^(2 * Number of years)Plugging in the given values, we get:Price = 25000 / (1 + 0.042/2)^(2 * 25)= 25000 / (1.021)^50= 8844.07Therefore, the bond should cost $8844.07, which is close to the given value of $8844.

A 25-Year Strip Bond with Face Value of $25 000