26-105 What is the first monthly payment on the Principal Only (PO)strip?
A)$3 million.
B)$421,928.
C)$250,000.
D)$299,775.
E)$171,928.

Question

Quizplus · Accepted Answer

According to the bond details given in the question, the monthly payment on the PO strip is $171,928. This can be calculated using the formula: PO strip payment = total PO strip amount / (PV factor of an ordinary annuity for N years at r%) = $25 million / (PV factor of an ordinary annuity for 20 years at 5.5%) = $171,928. Therefore, the correct answer is E.

26-105 What Is the First Monthly Payment on the Principal