1. Bond markets are the largest financial markets in the world. Does this make sense? Why should bond markets be larger than (for example) stock markets?
2. Why might a corporation be interested in issuing a zero-coupon bond rather than a conventional fixed-rate coupon bond? What different opportunities or threats does a ZCB represent from the perspective of the issuer? From the perspective of the investor?
3. Why should credit spreads change over time? (Credit spreads are the difference between the 
yields on lower- and higher-rated bonds; for example, between A-rated corporate issues and government bonds of the same maturities.)
4. How would you estimate the duration of a perpetual fixed-rate bond (for example, a British CONSOL)? Without performing any calculations, how long would you guess the duration on such a bond to be?
5. A fixed-rate coupon bond may be analyzed as a portfolio of zero coupon bonds, each element of
 which represents a separate promised payment of principal or interest. Is the same true of a floating rate bond?

Answer rating: 100% (QA)

Bond markets are typically larger than stock markets because bonds are more widely used as a means of financing by governments and corporations Bond m... View the full answer