STRIPS & TIPS

1. STRIPS & TIPS Josh McBee

2. STRIPS – Separate Trading of Registered Interest and Principles of Securities

3. PMT Type $60 $60 $60 $60 $60 $60 $1000 SOLD SOLD SOLD SOLD SOLD SOLD SOLD • Interest • Interest • Interest • Interest • Interest • Interest • Principal Separate and Sell Individually Bond

4. Bond Ex: 3yr semi-annual bond at 12%; YTM = 8% Bond PricingEx: 3yr semi-annual bond at 12%; YTM = 8%

5. Stripped BondEx: 3yr semi-annual bond at 12%; YTM = 8%

6. Stripped Bond Cont.Ex: 3yr semi-annual bond at 12%; YTM = 8%

7. Bought Bond for $1,104.81 • Sold for $1,146.11 • Profit of $41.30 YTM and Profits

8. CUSIP ID

9. TIPS – Treasury Inflation Protected Security

10. TIPSEx: 6yr annual bond at 6%; Principal = $1000

12. Treasury Strips: http://www.bondtrac.com/professional/information/education/TreasuryStrips.xml • New York Fed: http://www.newyorkfed.org/aboutthefed/fedpoint/fed42.html • FINRA org: http://www.finra.org/Investors/InvestmentChoices/Bonds/SmartBondInvesting/typesofbonds/P133240 • More on STRIPS: http://www.investinganswers.com/financial-dictionary/bonds/separate-trading-registered-interest-and-principal-securities-strips-905 • TIPS Example: http://www.investinginbonds.com/learnmore.asp?catid=9&subcatid=51&id=253 References

13. Questions