A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8938.

Name: A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8938.
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Question

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The price of a bond is calculated using the present value of its future cash flows. In this case, the bond has a face value of $25,000 and a yield of 4.2%. The present value of the bond's future cash flows is $8,938.

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