| U.S. Treasury STRIPS, close of business 05/15/12 |
| Maturity |
Price |
|
|
|
| May-13 |
99.624 |
|
|
|
| May-14 |
99.218 |
|
|
|
| May-15 |
98.686 |
|
|
|
| May-16 |
97.682 |
|
|
|
| May-17 |
96.375 |
|
|
|
| May-18 |
94.686 |
|
|
|
Suppose the (quoted) yield on each of the six STRIPS increases by .05%. Calculcate the percentage change in price for the one year, three year, and six year STRIPS. Which one has th elargest price change? Now suppose that the quoted price on each STRIPS decreases by .500. Calculate the percentage change in (quoted) yield for the one year, three year, and six year STRIPS. Which one has the largest yield change? What do your answers tell you about the relationship between prices, yields, and maturity for discount bonds?