Consider a $10,000 Face Value Strip Bond That Yields the Buyer

question 115

Essay

Consider a $10,000 face value strip bond that yields the buyer 4.60% compounded semi-annually that matures on June 1, 2023. Assume the yield does not change as years go by.
a) What will be the bond's value on December 1, 2014?
b) What will be the bond's value on December 1, 2018?
c) Suppose you invest an amount equal to the answer from Part (a) at 4.60% compounded semi-annually for four years. What will its maturity value be?
d) To three-figure accuracy, why do you get the same answers for Parts (b) and (c)?

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