What is the dollar price of a $100 face value STRIPS with six years to maturity, and a yield-to-maturity of 8.4 percent?
A) $62.25
B) $63.12
C) $61.04
D) $65.32
E) $64.18

Question

Quizplus · Accepted Answer

To calculate the dollar price of the STRIPS, we need to use the formula:
Dollar price = Face value / (1 + YTM)^n
where YTM is the yield-to-maturity expressed as a decimal and n is the number of years to maturity. Plugging in the values, we get:
Dollar price = 100 / (1 + 0.084)^6 = $61.04, rounded to the nearest cent. Therefore, the best choice is C.

What Is the Dollar Price of a $100 Face Value