Instructions

1. Describe the two distinct obligations incurred by a corporation when issuing bonds?
2. Explain the meaning of each of the following terms as they relate to a bond issue: (a) convertible (b) callable (c) debenture.
3. If you asked your broker to purchase for you a 7% bond when the market interest rate for such bonds was 8%, would you expect to pay more or less than the face value for the bond? Explain.
4. Would a zero coupon bond ever sell for its face amount?
(think about this last one…it involves a little thought!)