Jesus, make sure you know exactly what she's got. Not just what is it kinda supposed to be pretty much like. The headline "Yield-Hungry Retirees Turn to X" often becomes a very bleak "don't let this happen to you" story within five to ten years.
I dunno AXP, you're still at the mercy of the issuer for default risk. All else being equal, I'd rather buy the equities of these issuers for the dividends, appreciation potential and (as you well know) option writing opportunities.
IMO, people worry far too much about the value of what they may leave to their heirs. Unless people have more money than they can spend, they should be more concerned about their own well being and less concerned about heirs who can fend for themselves.
The key is to only invest in quality companies like a GE or GS and the balance in insured CDs. My main concern with buying long term fixed income securities is that interest rates go up and your principal is wiped out.
As you may remember-Grandma is currently invested heavily in equities-near 80%. She's going to use the dividends and option income generated from these holdings to buy bonds until the two are in balance.
Buying 2 year CDs that earn nothing just don't interest me. However, if one could invest in long term bonds or CDs without incurring interest rate risk then these investments become quite interesting especially if you buy a bond that trades at a discount to par.