223.8
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 in July 2018. (6 pts.)
| Bid | Asked | Ask Yield | |
| July 18 | 98.18 | 98.19 | 5.80 |
| Jan 19 | 94.07 | 94.25 | 6.00 |
| July 19 | 90.04 | 90.06 | 6.10 |
| Jan 20 | 88.15 | 88.17 | 6.18 |
As always, we use the Asked Prices, giving us the following facts:
| July 18 | Jan 19 | July 18 | Jan 19 |
| FV=100 | 100 | 100 | 100 |
| PV=98.19 | 94.25 | 90.06 | 88.17 |
So the PV of the bond's package of cash flows
is: 40(.9819)+40(.9425)+40(.9006)+1040(.8817)=1029.97