W98NOONMT.8
8. Use the following STRIP table to find the price of a 2 year 8% coupon, $1000 par bond with semi-annual coupon payments. The next coupon is due on July 15, 1998. (6 pts.)
| Bid | Asked | Ask Yield | |
| July 98 | 98:18 | 98:19 | 5.80 |
| Jan 99 | 94:07 | 94:08 | 6.00 |
| July 99 | 90:04 | 90:06 | 6.10 |
| Jan 00 | 88:15 | 88:17 | 6.18 |
After converting the Asked prices to dollars and cents, we
have the following facts:
| July98 | Jan99 | July 98 | Jan99 |
| FV=100 | 100 | 100 | 100 |
| PV=98.59 | 94.25 | 90.1875 | 88.53125 |
So the PV of the bond's package of cash flows
is: 40(.9859)+40(.9425)+40(.901875)+1040(.8852125)=1033.83