1.Describe what prepayment risk in a GNMA is.
2.What is the distinguishing feature of how municipal bonds are taxed?
3.Explain why bond issuers might voluntarily choose to put restrictive covenants into a new bond issue.
4.General Electric has just issued a callable 10-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $102. What is the bond’s yield to maturity and yield to call?
5.Boeing Corporation has just issued a callable (at par) three-year, 5% coupon bond with semiannual coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment date. It has a price of $99. What is the bond’s yield to maturity and yield to call?
6.Explain why the yield on a convertible bond is lower than the yield on an otherwise identical bond without a conversion feature.
7.You own a bond with a face value of $10,000 and a conversion ratio of 450. What is the conversion price?