What risk-free ZCBs trade in the U

) Zero-coupon bonds also know as treasury bonds have the lowest risk of all securites where no coupon is paid. It trades at discount and sold at par value. The prices drastically rise in case federal reserve cuts rate or stock prices fall.

Types of risk free ZCB in the US market:-

Treasury bills

Long term zero-coupon bonds

US saving bonds.

Any type of bonds which doesn't pay coupon but sold at discount.

2) fisher equation is the relationship between nominal and real interest rates under the effect of inflation.

1+i = (1+r) (1+π)

i = nominal interest rate

r = real interest rate

π = inflation

It is used when an investor or lender loses purchasing power because of inflation and demands for additional rewards for the loss compensation.

3)The component of a corporate bond's yield is:-

Base interest rate

Credit spread

Expected future inflation

Interest rate risk

Default risk

Lack of Liquidity

Taxability

The base interest rate is equivalent to a government bond's yield having a similar maturity.