1. The article Roll up, roll up and write down (The Economist, 21 November 2020) proposes new types of bonds as a partial solution to dealing with defaults in sovereign bond markets. These include contingent bonds that, for example, pay less in the event of a natural disaster (i.e. the payments are contingent on the state of the world), as well as bendy bonds that allow the issuer to extend the maturity or defer interest payments in return for paying more later.

   1. (4 points) Describe the benefits these bonds offer to demanders of funds?

   2. (4 points) Describe the benefits these bonds offer to suppliers of funds?