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At what price could the principal strip be purchased

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Question - On 12/31/17, public debt with a nominal value of € 1,000 is issued at the par with a yield of 3.5% and six-monthly interest payments. Maturity is 12/31/22 (5 years).

a) If on 3/31/19 the security could be segregated into strips, how many coupon strips (IO) would be generated and what would be the nominal amount of each of them?

b) Assuming that interest rates on that date (3/31/19) were 2.75%, at what price could the principal strip (PO) be purchased?

Reference no: EM133026623

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