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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?

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Category:- Business Management
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