A $1,000,000 face value STRIPS has a yield to maturity of 6.8 percent. If the maturity is in 13 years, what is the dollar price of the STRIPS?
A) $419,243
B) $417,867
C) $405,321
D) $412,634
E) $425,181

Question

Quizplus · Accepted Answer

The price of a STRIPS is calculated by discounting the face value back to the present value using the yield to maturity. The formula is: Price = Face Value / (1 + Yield)^Years. Plugging in the values: $1,000,000 / (1 + 0.068)^13 = $419,243.

A $1,000,000 Face Value STRIPS Has a Yield to Maturity