Problem
I. What would you expect to happen to the spread between yields on commercial paper and Treasury bills if the economy were to enter a steep recession?
II. What are the key differences between common stock, and preferred stock, and corporate bonds?
III. Find the equivalent taxable yield of a short-term municipal bond with a yield of 4% for tax brackets of (i) zero, (ii) 10%, (iii) 20%, and (iv) 30%.
IV. Explain the difference between a put option and a short position in a futures contract.
V. Explain the difference between a call option and a long position in a futures contract.