7A-3 STRIPPED U.S. TREASURY BOND McGwire Company's pension fund pro- jected that a significant number of its employees would take advantage of an early retirement program the company plans to offer in 5 years. Anticipating the need to fund these pensions, the firm bought zero cou- pon U.S. Treasury Trust Certificates maturing in 5 years. When these instruments were originally issued, they were 12% coupon, 30-year U.S. Treasury bonds. The stripped Treasuries are currently priced to yield 10%. Their total maturity value is $6,000,000. What is their total cost (price) to McGwire today?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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7A-3 STRIPPED U.S. TREASURY BOND McGwire Company's pension
fund pro- jected that a significant number of its employees would
take advantage of an early retirement program the company plans
to offer in 5 years. Anticipating the need to fund these pensions, the
firm bought zero cou- pon U.S. Treasury Trust Certificates maturing
in 5 years. When these instruments were originally issued, they were
12% coupon, 30-year U.S. Treasury bonds. The stripped Treasuries
are currently priced to yield 10%. Their total maturity value is
$6,000,000. What is their total cost (price) to McGwire today?
Transcribed Image Text:7A-3 STRIPPED U.S. TREASURY BOND McGwire Company's pension fund pro- jected that a significant number of its employees would take advantage of an early retirement program the company plans to offer in 5 years. Anticipating the need to fund these pensions, the firm bought zero cou- pon U.S. Treasury Trust Certificates maturing in 5 years. When these instruments were originally issued, they were 12% coupon, 30-year U.S. Treasury bonds. The stripped Treasuries are currently priced to yield 10%. Their total maturity value is $6,000,000. What is their total cost (price) to McGwire today?
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