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      Question

      In June 2025, RBI allowed STRIPS trading to state

      government bonds meeting certain residual maturity and outstanding amount requirements . Which of the following is the correct full form of STRIPS?  
      A Separate Trading of Reserved Interest and Principal of Securities Correct Answer Incorrect Answer
      B Separate Trading of Restructured Interest and Principal System Correct Answer Incorrect Answer
      C Separate Trading of Reserved Interest and Principal of System Correct Answer Incorrect Answer
      D Separate Trading of Registered Interest and Principal of Securities Correct Answer Incorrect Answer
      E Separate Trading of Restricted Interest and Principal System Correct Answer Incorrect Answer

      Solution

      STRIPS stands for Separate Trading of Registered Interest and Principal of Securities . These are securities created by convert ing a bond’s periodic coupon payments and the principal into individu al l zero-coupon instruments. Each of these can be traded separately, allowing investors to buy specific cash flows instead of the entire bond. For example, a 10-year SDL offering annual interest of Rs 70 and repaying Rs 1, 000 in principal at maturity could be split into eleven separate securities - ten   interest payments and one principal payment.

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