1. Stanford Corporation arranged a repurchase agreement in which it purchased securities for $1,800,000 and will sell the securities back for $2,000,000 in 50 days. What is the yield (or repo rate) to Stanford Corporation? (2 pts)

2. What are bond protective covenants? Why are they needed?

3. Explain the use of call provisions on bonds. How can a call provision affect the price of a bond?

4. Are variable-rate bonds attractive to investors who expect interest rates to decrease? Explain. Would a firm that needs to borrow funds consider issuing variable-rate bonds if it expects interest rates to decrease in the future? Explain.