In June $2009$, corporate bonds of General Motors (GM) were at a default value of 12.5 cents on the dollar. The price fell because of the poor credit position of GM and the impending bailout needed from taxpayers. What happens when a bond defaults? What did GM do? What is the current rating for GM bonds?

Listen to each speaker, then answer the question he or she asks you at the end.

Explain how a bond fund lowers the risk of owning bonds, which is already considered safer than stock.

Why might an investor choose to buy bonds rather than stocks? As a bondholder, would your investment in a corporate bond be more secure than a stockholder's investment? Why or why not?

Les has chosen to buy a 5.5 percent, $7,000 corporate bond. The bond currently sells for 106. Compute his current yield on the bond, and explain to him why it is not the same as the stated interest rate.

You have the choice of buying a municipal bond with a rating of Aaa paying 4 percent or a corporate bond with a rating of Ba paying 8 percent. Which bond would be your choice? Explain why.

What is a government-sponsored enterprise? Provide an example.

Would you choose to buy a Treasury security through a full -service broker, discount broker, bank, or TreasuryDirect? Why?

Tatiana is considering purchasing a 10,000$,$9$percent corporate bond. She also found that she can buy a$ $10,000$, $7$ percent municipal bond. Her federal income tax rate is $28$ percent . Determine her net interest. Show your computations.

What is a callable bond? Does this feature make the bond more attractive to the investor?

After your discussion with Jason, he asks you whether he should consider buying a corporate bond. Explain to him how bond investing works and the difference between the types of corporate bonds. What type of corporate bond would you recommend? Why?

Explain how bond prices are linked to interest rates . What causes the price of an existing bond to increase or decrease?

Match the terms with the definitions. Some terms may not be used.

a. bond default

b. bond fund

c. bond listings

d. bond rating

e. hedge

f. investmentgrade bond

g. junk bond

h. primary market

i. secondary market

__When a bond issuer cannot meet the interest and/or principal payments on a bond

You bought a $10,000, 6 percent corporate bond at face value that matures in five years. What would be your total earnings during that five-year period?