It is important to remember that the basic principle underlying bootstrapping is that the value of the Treasury coupon security should be equal to the value of the package of ________ that duplicates the ________.

Question

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Bootstrapping is a technique used to estimate the yield curve for a set of fixed-income securities. In bootstrapping, the current market prices of the bonds are used to derive the implied forward rates for future periods. The basic principle underlying bootstrapping is that the value of the Treasury coupon security should be equal to the value of the package of zero-coupon Treasury securities that duplicates the coupon bond's cash flow. Hence, option B is the best choice as it mentions zero-coupon Treasury securities, which match the concept of bootstrapping.

It Is Important to Remember That the Basic Principle Underlying