Question

What is the difference between a discount security and an interest-bearing security? Which type is usually traded in money markets and which type would a 10-year corporate bond normally be?

Answer 1

Discount securities are securities which are offered at discount and they will be redeemable face value are their maturity and they will not be paying any kind of the cash flows in between.

interest-bearing securities will be paying out interest and cash flow at the regular intervals and they are issued at par not discount.

There are many types of discount securities that are traded in the money markets like commercial paper along with the certificate of deposits and the bankers acceptance and the bills.

Corporate bonds will be interest-bearing security.