Questions:

1.What is an inflation-indexed bond? What is a difference between the inflation-indexedbond and a conventional (nominal) bond? Which bond is riskier, the inflation-indexed bond or theconventional bond? Why? What are benefits of inflation-indexed bonds for investors(savers)? What are benefits of inflation-indexed bonds for issuers (borrowers)? Explain eachbriefly

2. What is a zero coupon bond? Explain Market risk (interest rate risk) andreinvestment risk. Which bond has more market risk, a coupon-paying bond or a zero couponbond? Why? Which bond has more reinvestment risk, a coupon-paying bond or a zero couponbond? Why? What is "duration"? What kind of risk is duration intended to measure? Explaineach briefly