Question 17: Which bond has the highest reinvestment rate risk characteristics? A. 5% coupon bond with 5 years maturity B. 6% coupon bond with 5 years maturity C. 0% coupon bond with 5 years maturity D. 3% coupon bond with 5 years maturity (1) B= 6% coupon bond with 5 year maturity (2) B=the issuer is investing grade (3) B = Municipal Bond Municipal bonds are tax free and comparatively safe. So, if we calculate the after tax yield of corporate bond, it will be 4 - 25% =3.50, both the bonds have the same yield effectively and as Municipal bonds are safer. Question #8: Moody's Rating Agency rates an issuer bond with a rating of Baal. What conclusion can be made A. The issuer of the bond is classified as low-grade, and speculative B. The issuer is investment-grade C. Issuer is in a "risk of default" D. The issuer is termed "fallen angel because it is categorized as non-investment grade by Moody's