 Although yield to maturity on bonds of similar maturities are closer reasonably, yet they differ. Finance experts and finance practitioners generally summarize this relationship between yield and the maturity graphically in the form of a yield curve. Now what is a yield curve? It is basically a plot of yield to maturity as a function of time to maturity. So we draw yield to maturity against the time to maturity graphically and that pictorial demonstration is termed as the yield curve. Yield curve is one of the key concern of fixed income securities analysis and in bond valuation this concept is central to the financial analysis. Yield curve allows investors to gauge their expectations for the future interest against the market interest and the relationship between yield and maturity can vary widely. Even unexpected short term rates can be implied from the yield curve. We have different shapes of the yield curves. If we start from the left we see that in the panel A the curve is relatively flatter and in panel B the curve is rising upward so it is an upward yield curve. In the panel C we see that the yield curve is inverted from immediately the curve is down towards the below and the last in the panel D we see that the yield curve is a harmed shaped curve. We know that yields on different maturity bonds are not always equal because there exists some term structure in this scenario. You need to consider each bond's cash flow as an individual cash flow or as a standalone zero coupon bond. The value of such bond should be equal to the sum of the value of its all parts that is the coupon interest and the face value of the bond. What is meant by now bond stripping? Bond stripping means the selling each coupon or principal repayment from a whole treasury bond as a separate individual cash flow. In the process of bond stripping the value of the whole bond equals the total value of the individual pieces of the cash flow that are bought piece by piece in the strip's market. First we have bonds reconstruction by bond reconstruction we mean that it is the process of buying individual zero bonds in the strips. This means in the next phase the process starts with the reassembling of the cash flows into a whole coupon bond and then we need to sell this whole bond for more than the cost of its individual pieces. This stripping and reconstitution of the bonds offer arbitrage opportunities to a bond investor meaning thereby that these offer to the investor as an exploitation of the mispricing among two are more of the bonds to clear a risk less profit in the bonds market. How to value the strip bonds? In fact while valuing strip bonds the strip cash flows are discounted at an appropriate discount rate on individual basis and the discount rate is basically the yield appropriates to a particular maturity. We have an example in this regard where a 10% coupon bond with a maturity of 3 years makes its payments annually using the discount rates of 5%, 6% and 7% on the respective cash flows maturity the bond value can be the process of discounting the individual coupon cash flows where we have the $100 divided by the first year's discount rate plus the coupon divided by the second year's discount rate plus the coupon divided by the third year's discount rate and when we sum up the discounted values of all these three cash flows we have the total value of 1082.17 so that is the present value of a strip bond. What is the difference between pure yield curve and on the return yield curve in fact in pure yield curve the pure yield curve uses stripped are zero coupon treasuries whereas on the run yield curve it uses the recently issued coupon bonds selling at or the near par value then the pure yield curve may differ significantly on the run yield curve whereas on the run yield curves are typically published by the financial media or finance financial press and the on the run treasuries have greatest liquidity for the bond investors.