5. Explain the difference between discount bonds and premium bonds. When do bonds trade at

face value? How do discount bonds behave? How do premium bonds behave? What is the

nature of the returns from discount bonds vs. those from premium bonds?

6. Explain why bond values decrease when interest rates rise.

7. What is default risk, how is it measured, and how does it impact bond values?

8. Describe three optional features of bonds (e.g. call provision) and how they impact bond value.