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- Yield differences between coupon and principal STRIPS | Managerial Finance | Vol 40, No 4.
As a result, the impact of interest rate fluctuations on strip bonds, known as the bond duration , is higher than the impact on a coupon bond. On maturity date, the investor is repaid an amount equal to the face value of the bond. If the bond is held to maturity, the return earned is taxable as interest income.
The amount of interest an investor must claim and pay taxes on a strip bond each year adds to the cost basis of the bond. If the bond is sold before it matures, a capital gain or loss may ensue. Your Money.
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What is a Strip Bond A strip bond is a bond where both the principal and regular coupon payments--which have been removed--are sold separately. Compare Popular Online Brokers. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Related Terms Coupon Stripping Coupon stripping is the separation of a bond's periodic interest payments from its principal repayment obligation to create a series of individual securities.
Bond Valuation Bond valuation is a technique for determining the theoretical fair value of a particular bond. Treasury Receipt A treasury receipt is a zero-coupon bond that does not pay interest at regular intervals between the date of issue and maturity, but instead accrues the interest and pays it with the principal at maturity.
Bond Discount Bond discount is the amount by which the market price of a bond is lower than its principal amount due at maturity. Rent this from Deepdyve.
Introduction To STRIPS
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