1. Why would you invest in a debenture, rather than a bond, if both securities were issued by the same company?

2. Why might a corporation issue a bond with a call feature?

3. Why would a company issue a convertible bond?

4. If extendible and redeemable bonds offer lower coupon rates than straight bonds from the same issuer with the same maturity, why would you buy these bonds?

5. Calculate the price of a 5% Government of Canada bond with a face value of $100,000 that matures in 16 years if the required return is 6% and coupons are paid semiannually. Is the bond trading at a discount or premium? Explain your answer.

6. What is the term structure of interest rates and the liquidity preference theory?

7. Differentiate between the pure expectations and market segmentation theories.

8. Why might you invest in banker's acceptances rather than commercial paper?

9. What is a mortgage-backed security (MBS), and how is its value affected by interest rates?

10. The textbook states that tax planning is an important consideration if you hold strip bonds outside of a registered portfolio. Explain, using a 10-year zero coupon bond with a face value of $100,000 and a 5% interest rate with semi-annual compounding.

11. You buy a $50,000 real return bond with a 6% coupon paid semi-annually. If inflation increases by 3% in the next six months, what is the next interest payment?

12. What is the purpose of bond rating agencies, and how will a downgrade impact a company's bonds?

13. Describe inflation, reinvestment, and interest rate risk.

14. What is the matching principle regarding bond maturity?

15. If you expect interest rates to fall, do you invest in short-term bonds with a high coupon or long-term bonds with a low coupon?