A $50,000 face value STRIPS matures in 9 years and has a yield to maturity of 7.76 percent. What is the current dollar price of this security?
A) $25,199.68
B) $27,211.08
C) $29,038.18
D) $34,141.41
E) $36,809.18

Question

Quizplus · Accepted Answer

The correct answer is A because the current dollar price of this security is $25,199.68. This is calculated by taking the face value of the security ($50,000) and multiplying it by the present value factor for a 7.76% yield to maturity for 9 years. The present value factor is 0.5039936, which is calculated using the formula PV = FV / (1 + r)^n, where FV is the face value, r is the yield to maturity, and n is the number of years to maturity.

A $50,000 Face Value STRIPS Matures in 9 Years and Has