1. What are the two types of income an investor can earn on a bond? How is each taxed?
2. Compare the tax treatment of the coupons on the following bonds:a bond issued by the city of Houston, a bond issued by GE, and a bond issued by the U.S. Treasury.
3. According to Moody's, "Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk."
a. What "obligations" is Moody's referring to?
b. What does Moody's mean by "credit risk"?