13) What are the two types of municipal bonds, and which type has the greater default

risk? Why? General Obligation Bond: A state or municipal bond backed by the full faith and credit--that is the taxing power--of the issuer Revenue Bond: State or municipal bonds that have interest and par value paid for with funds from a designated project or specific tax. 14) What is a zero coupon bond? Give an example of when the use of zero coupon bonds might be appropriate in an investment portfolio. Do you think these types of bonds should be owned in taxable or tax-deferred accounts? Zero Coupon Bond: Bonds that dont pay interest and are sold at a deep discount from their par value. 15) What poential risks do investors face when they purchase junk bonds? How are investors compensated for these risks? What rating would you expect to see a junk bond carry? Junk bonds: Very, risky, low-rated bonds, also called high-yield bonds. These bonds are rated BB or below. 16) Explain the difference between current yield and yield to maturity. Which is a more accurate measure of the return an investor will recieve? Current Yield: The ration of the annual interest payment to the bonds market price. Yield to Maturity: The true yield or return that the bond-holder recievers if a bond is held for maturity. Its the measure of expected return for a bond. Yield to Maturity is more accurate. 17) What is the difference between the quoted price and the invoice price? When you would expect the two prices to be equal? Quoted Price: The stated price Invoice Price: the sum of both the quoted or stated price of a bond and the bonds accrued interest. Its the price you pay if you buy the bond in the secondary market. 18) What is meant by the terms premium and discount when referring to the price of a bond? Premium bond: a government bond that bears no interest or capital gains but enters the holder into lotteries. Discount Bond: a zero-coupon bond bought at a price lower than its face value, with the face value repaid at the time of maturity.