A treasury STRIP is a 0 coupon bond issued by the U.S Government and has a yield based on a discount price and the maturity.
Since T Strips are 0 coupon - they do not pay interest, so the overall rate of return is shown in it's yield to maturity. These securities are backed by the US Government and were created from Treasury Notes and Bonds. Strips are not considered new debt, but redeemed bonds re-issued as 0 coupon yield securities.
Maturities are normally long term (over 5 years) and the T Strip yield is figured using the deep discount price (below par), and the years to maturity. This will give the investment a realized overall rate of return or yield to maturity.
http://www.aitraining.com/treasurystrip.htm
Since T Strips are 0 coupon - they do not pay interest, so the overall rate of return is shown in it's yield to maturity. These securities are backed by the US Government and were created from Treasury Notes and Bonds. Strips are not considered new debt, but redeemed bonds re-issued as 0 coupon yield securities.
Maturities are normally long term (over 5 years) and the T Strip yield is figured using the deep discount price (below par), and the years to maturity. This will give the investment a realized overall rate of return or yield to maturity.
http://www.aitraining.com/treasurystrip.htm
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