8a. The price of a Treasury strip note or bond can be found using Appendix C toward the back of the text. It is simply the present value factor from the table times the maturity (par) value of the Treasury strip. Assume you are considering a $10,000 par value Treasury strip that matures in 25 years. The discount rate is 7 percent. What is the price (present value) of the investment?

8b. Review the instructions in problem 8. Now assume as alternative A you are considering a $10,000 par value Treasury strip that matures in 20 years. The discount rate is 6 percent. You also are considering alternative B, which represents a $10,000 par value Treasury strip that matures in 16 years. The discount rate is 8 percent. Which has the lower price (present value)?

9. You buy a $1,000 inflation-indexed Treasury security that pays 4 percent annual interest. Assume inflation is 5 percent in the first two years you own the security.a. What is the inflation-adjusted value of the security after two years?b. How much interest will be paid in the third year? The basis for computing interest is the inflation-adjusted value after year two.