Hello all,
Just a very quick and basic question on Strips for someone who’s feeling helpful today,
I’ve been told that when a fixed interest security is stripped down it can be done so into all of its interest payment dates and its redemption payment. So a basic example, a five year government bond could be stripped down into 11 seperate securities (10 interest payments strips and the redemption strip).
That I understand fine, what I don’t completely understand is the structure behind them as I was told each strip will also get some of the redemption capital?
Now that would make sense if there were only 10 strips (using the above example) as the redemption amount would be split evenly between them when the time comes but if there’s a redemption strip then surely ALL the capital is redeemed to that particular strip’s holder?
This would also mean the interest payment strips just mature on their set interest payment date?
I hope someone can help with this, it’s only a little issue but its niggling nonetheless!
Thankyou,