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1 FINANCE MCQS

A Treasury security where the final principal payment is separated from periodic interest payments is called ____________?

  • STRIP
  • Separated security
  • Inflated security
  • Coupon paid security
Correct Answer: A. STRIP

Detailed Explanation

A STRIP (Separate Trading of Registered Interest and Principal Securities) is a type of U.S. Treasury security where the principal payment is separated from the interest payments. This allows each component to be sold individually as zero-coupon securities. STRIPS are commonly used for long-term investment and are backed by the U.S. government.

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