Investors sometimes will strip a coupon from a bond in

Reference no: EM13618916

Investors sometimes will "strip" a coupon from a bond in their portfolio and sell that strip in the market to obtain cash (i.e the strip is, in effect, a zero coupon bond with a maturity date the same as the date the coupon payment was due). A portfolio manger holds $100 million of a 5% Treasury bond with 12 years remaining to maturity. The bond pays intrest semi-annually. She wishes to sell the coupon due exactly 7 years from now. The yield to maturtiy on a 7 year tresury zero coupon bond is 1.02% p.a How much will she obtain for the strip.

Reference no: EM13618916

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