Pricing a risk-free bond based on STRIPS - Example 2
Channel: Jonathan Kalodimos, PhD
Date: 02/03/2017

Example: Suppose you have a risk-free bond that has a face value of $100, a two year maturity, pays a 5 percent coupon with semiannual coupons. The term structure of interest rates (via STRIPS) are provided in the table below. What is the price of the bond?

Years    APR
0.5        6%
1.0        7%
1.5        8%
2.0        9%