Products & Their RisksQuestion 24 of 398
A Treasury STRIPS is best described as:
a.A Treasury bond whose coupon rises with inflation
b.A floating-rate Treasury security
c.A short-term Treasury issued only to banks
d.A zero-coupon security created by separating a Treasury bond's principal and interest payments
Explanation
STRIPS are zero-coupon instruments created when a Treasury bond's principal and each interest payment are separated and sold individually at a discount. They are not inflation-linked, floating-rate, or bank-only instruments.
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