A Treasury security carries a fixed 3 percent annual coupon rate and matures in exactly two years. The Treasury is currently priced at $ 10,000 par value to yield 3 percent to maturity. Assume that you can buy the bond and strip the coupons and final principal payment and sell each of them as a zero coupon security. Given the following zero coupon rates, what price would you get for this purchase and subsequent sales?
Maturity 6- month 1- year 18- month 2- year
Zero coupon yield 2.2% 2.6% 2.9% 3.6%

  • CreatedNovember 03, 2015
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