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As part of your retirement planning, you have decided to invest in 40-year strip bonds. As you know, a strip bond is created by stripping
As part of your retirement planning, you have decided to invest in 40-year strip bonds. As you know, a strip bond is created by "stripping" the coupons from the corpus or face value of the bond. The strip of coupons is sold to one investor while the corpus or face value is sold to another investor. You are interested in buying a $100,000 face value bond. If the appropriate yield is 8%, how much should you pay today for this bond?
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