For the corporate bond issues reported in Question 2, answer the following questions:

a. What is the yield spread between the Southern Bell Telephone and Telegraph bond issue and the Bell Telephone Company (Pennsylvania) bond issue?

b. The Southern Bell Telephone and Telegraph bond issue is not callable, but the Bell Telephone Company (Pennsylvania) bond issue is callable. What does the yield spread in part a reflect?

c. AMR Corp. is the parent company of American Airlines and is therefore clas- sified in the transportation industry. The issue is not callable. What is the yield spread between AMR Corp. and Southern Bell Telephone and Telegraph bond issue, and what does this spread reflect?

d. What is the spread between the General Electric Capital Co. issue and the Mobil Corp. issue?

e. The Mobil Corp. issue is not callable. However, the General Electric Capital Co. issue is callable. How does this information help you in understanding the spread between these two issues?

AppendixLO1