Why do at least some investors like to invest in asset-backed securities? Check all that apply: ☐ ABS are less risky than bonds with the same rating. It lowers their capital requirements. ☐ It gives them control over more assets. ☐ ABS often pay higher interest rates than bonds with the same rating.

Why think that convertibles are riskier than straight bonds?

Corporate bonds are riskier than US Treasury, so they pay default risk premium over what Treasury pays to stay competitive in the market.  True  False

A bond does not pay out regular interest. This means that *a. This is a bad investment.b. It is unsecured.c. It is a junk bond.d. It is a zero-coupon bond.

In a few sentences, answer the following question as completely as you can. In discussing asset pricing, your textbook suggests that an investor will be indifferent between two bonds with equal yield to maturity, as long as they are of equivalent risk. Can you think of any real-world factors that might make an investor prefer one of these bonds over the other?

ETFs are the most popular investment instruments for individual and institutional investors. You are interviewing with a FinTech firm that creates bond ETFs. Make a pitch for how you will design Bond ETFs that offer something unique and that are able to stand out in the crowd given the proliferation of bonds ETFs in the market.  Keep in mind that bond values depend on, (a) bond ratings, and (b) the macroeconomic environment. Also keep in mind the relation between the promised payments and interest-rate risk; indenture/structured provisions and agency theory; the concept of over and underpriced bonds; the concept of hidden risk; the importance of being able to predict the macro environment; and the importance of AI and ML in a robo-advising context.

Explain why company managers might choose to issue zero-coupon bonds instead of interest-bearing bonds or coupon bonds instead of zero- coupon bonds? Give pros and cons of each. Be sure to consider the situation from the bond issuer's viewpoint and not the bondholder.