Question

N. A Treasury Strip has the following price quotation on August 15, 2018: Maturity Bid Asked 2028 Aug 15 59.040 59.060 What is the yield to maturity?

Answer 1

Yield to maturity of treasury strips can be calculated in following manner -

Yield to maturity of treasury strips = (Face value/ Quoted asked price) ^ (1/n) -1

Where,

Yield to maturity of treasury strips =?

Face value or par value = $100 (assumed)

Quoted asked price of strips = $59.060

Time period n = 10 years (from 15^th Aug, 2018 to 15^th Aug, 2028)

Therefore,

Yield to maturity of treasury strip = ($100/$59.060) ^ (1/10) -1

= 1.05407 – 1 = 0.05407 or 5.407%