A $1,000 face value strip bond has 22 years remaining until maturity. What is its price if the market rate of return on such bonds is 6.5% compounded semi-annually?

Market Rate

The prevailing interest rate available in the marketplace, often used as a benchmark for setting loan or investment interest rates.

Compound Semi-Annually

Interest on an investment or loan is calculated twice a year, with each calculation adding the accrued interest to the principal for future interest computation.

Strip Bond

A debt security that has had its main components, such as periodic interest payments, separated, leaving only the principal to be repaid at maturity.

Ascertain the maturity value and accrued interest of a variety of investment tools, including GICs, strip bonds, and savings bonds.

Verified Answer

Justyna DrozdApr 28, 2024

Final Answer :

$244.81

Learning Objectives

Ascertain the maturity value and accrued interest of a variety of investment tools, including GICs, strip bonds, and savings bonds.

A $1,000 face value strip bond has 22 years remaining until maturity. What is its price if the market rate of return on such bonds is 6.5% compounded semi-annually?

Definitions

Learning Objectives

Learning Objectives

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