Bloomberg Bonds

Please use the Bloomberg bonds (attached below) to answer few questions:

a). Consider the two bonds issued by Texas Utilities and Coastal Corporation. The two bonds are identical in many respects, have the same rating, however offering different yields. Which one of the two bonds you are likely to invest and why?

b). It appears that the law of one price (assets of the same risk class should offer same return) is violated. Can you offer reason(s) why?

c). Price and yield are inversely related. As yield rises, price falls and Vis versa. Can you explain why?

Issuer	Coupon %	Maturity	YTM %			Par Amount (million)	Full Price (000)	S&P Credit Rate
Treasury	6.5	2/15/10	4.55			67	76,387
Treasury	5.625	5/15/08	4.64			92	98,762
Treasury	5	8/15/11	4.57			84	87,192
Treasury Sector							262,341
Time Warner Enterprise	8.18	8/15/07	5.47			82	93,710	BBB+
Texas Utilities	6.375	1/1/08	6.19			30	30,678	BBB
Rockwell International	6.15	1/15/08	6.04			52	52,837	A
Transamerica Corporation	9.375	3/1/08	6.34			15	17,445	AA-
Coastal Corporation	6.5	6/1/08	6.76			30	30,153	BBB
United Airlines	6.831	9/1/08	5.99			38	39,949	A-
Burlington Northern Santa Fe	7.34	9/24/08	5.67			3	3,390	A+
News America Holding	7.375	10/17/08	6.56			30	32,292	BBB-
Litton Industries	8	10/15/09	6.70			60	66,834	BBB-
America Standard Inc.	7.625	2/15/10	7.59			41	41,332	BB+
Caterpillar Inc.	9.375	8/15/11	6.01			60		A+
Corporate Sector							436,248
Portfolio							698,589

Source: Bloomberg Financial

2^nd column: coupon rate, coupon payment=coupon rate *par amount

Column 3: yield to maturity; interest rate that depends on 6 factors you know

Column 4: Par value of bond

Column 5: full price or PV of bond

Column 6: S & P rating; issuing company credit score; AAA the highest, AA, A, BBB (all of them investment grade), BB B, CCC, CC, C all speculative very risky bonds with very high yield and low price.