Question

6. Types of bonds Aa Aa E Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Which of the following types of bonds have the least default risk? O Treasury bonds Corporate bonds O Municipal bonds Oc Based on the information given in the following statement, answer the questions that follow: New York City issued a general obligation bond for a canal in 1812. It was the first formal debt instrument with a fixed repayment schedule issued by a city. What type of bonds are these? Who is the issuer of the bonds? O Municipal bonds Corporate bonds O Treasury bonds The New York City government O Federal Reserve Bank of New York O Bank of New York

Answer 1

The bonds which have the least default risk are Treasury bonds as these bonds are backed by the full trust and faith of the government issuing these bonds. So, these bonds can never default and it offers the lowest yield.

These are municipal bonds and are issued by the New York city Government.

The non-convertible bond will have a higher yield as they do not include the option to convert these bonds into stock at the discretion of the bond holder.

So, correct option is option 1.

Nazim will put these bonds when he has reinvestment options with higher  yields. They have the option to return the bonds back to issuer and reinvest in new bonds offering a higher yield than the previously purchased  bonds.

So, the correct option is option 1.

Purchasing power bonds. Such bonds give higher cash flows when inflation is high and lower cash flows when it is low.