Treasury STRIPS came into existence because
A)investors demanded a tax-free long-term bond.
B)the Treasury wished to shift from long-term borrowing to short-term borrowing.
C)high inflation rates led to an increased demand for high-yield bonds.
D)investors demanded long-term discount bonds.

Question

Quizplus · Accepted Answer

Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) were created in response to investor demand for long-term discount bonds. These bonds are created by stripping the interest payments and principal payments from Treasury securities and creating separate, tradable securities with each payment. This allows investors to purchase a long-term bond at a discount, rather than paying the full face value of the bond at maturity.

Treasury STRIPS Came into Existence Because