Examine the tombstone announcing the issue of State of Hawaii general obligation bonds (page 5). All of these bonds are being issued in 1983. However, their maturities vary from 3 years to 20 years. All bonds pay interest semi-annually.

A) Examine Bond A (maturing in 1991). This bond will be issued at 102.33% of face value.

1. What is the yield to maturity for Bond A?

2. What effective annual rate of return will Bond A earn (if held to maturity)?

3. Identify three features of Bond A that might make it attractive to potential investors.

B) Examine Bond B (maturing in 2001).

1. At what price will Bond B be issued?

2. Bond A vs. Bond B. Although both of these bonds are obligations of the State of Hawaii, their yields differ substantially. Identify two reasons for this differential.

$75,000,000 State of Hawaii General Obligation Bonds of 1983, Series AX AMOUNTS, MATURITIES, RATES AND YIELDS OR PRICES $4,170,000 1986 8.40% 6.70% $4,165,000 1995 . 8.70% 100 4,170,000 987 8.40 7.00 4,170,000 98 8.40 7.30 4,170,000 1989 8.40 7.60 4,170,000 1990 8.40 7.80 4,170,000 1991 8.40 4,165,000 1992 8.48.20 4,165,000 1993 8.40 100 4,165,000 1994 8.60 100 4,165,000 1996 8,80 10 4,165,000 1997 8.90 00 4,165,000 1998 9 4,165.000 1999 9.10 100 4,165,000 2000 9.20 100 4,165,000 2001 914 9.30% 4,165,000 2002. 9 9.40 4,165,000 2003. 9 9.40 100 Bond A 1994. 8.00 100 1 4,165,000 2002: 9% 940%+BndB TAX EXEMPTION In the opinion of Bond Counsel, Interest payable by the State of Hawail upon its bonds is exempt from all present Federal and State of Hewail personal income taxes under existing tatutes, regulations and court decisions Bank of America NT&SA Smith Barmey,Harris Upham& Co. Blyth Eastman Paine Webber Drexel Burnham Lambert A. G. Becker Paribas Dillon, Read & Co. Inc. Hyun, Kowal & Co., Inc. Seattle-First National Bank Wedbush, Noble, Cooke, Inc. J. A. Overton & Co. Bankers Trust Company Morgan Guaranty Trust Company of New York Bear, Stearns&Co Merrill Lynch Capital Markets Salomon Brothers Inc Bank of Boston Shearson/American Express Inc. Dean Witter Reynolds Inc NCNB National Bank Langdon P. Cook & Co. Stone & Youngberg