Which of the following statement is correct?

1. The discount from par value for a discount bond declines as maturity approaches.

2. All the answers are correct.

3. The positive relationship (move in the same directions) between bond price and YTM is important to bond traders.

4. Bond coupon rate fluctuates through time and determines what the bonds coupon payments will be, but the required return is fixed.

5. Many large investors such as pension plans and insurance firms are prohibited from investing in rated bond issues.