Question: 1. What is the difference between a coupon bond and a discount bond? Explain the way in which a bond whose time to maturity is

1. What is the difference between a coupon bond and a discount bond? Explain the way in which a bond whose time to maturity is the same as the holding period differs from a bond whose term to maturity is longer than the holding period. )

2. What is the difference between the risk and term structure of interest rates? Explain what could cause the spread between the interest rate on a default-free Treasury bond and a corporate bond to increase assuming that both have the same term to maturity. Draw a diagram to supplement your answer.

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