A stripped bond:A) Pays coupons at regular intervals until maturity.B) Typically sells at a premium from its face value.C) Increases in value when interest rates increase.D) Pays no coupons, thus it sells at a deep discount from face value.E) Decreases in value when interest rates decrease.

Question

A stripped bond:A)  Pays coupons at regular intervals until maturity.B)  Typically sells at a premium from its face value.C)  Increases in value when interest rates increase.D)  Pays no coupons, thus it sells at a deep discount from face value.E)  Decreases in value when interest rates decrease.

Jagdesh Ladkani · Accepted Answer

Final Answer : D, Explanation :  Stripped bonds do not pay coupons; instead, they are sold at a significant discount from their face value and pay the full face value at maturity. This structure is why they do not provide regular interest payments like traditional bonds.

A stripped bond:

A) Pays coupons at regular intervals until maturity.
B) Typically sells at a premium from its face value.
C) Increases in value when interest rates increase.
D) Pays no coupons, thus it sells at a deep discount from face value.
E) Decreases in value when interest rates decrease.

Definitions

Learning Objectives

Learning Objectives

Related questions