1. In practice, the securities used to construct the theoretical spot-rate curve are the most recently auctioned Treasury securities of a given maturity. Such issues are referred to as the on-the-run Treasury issues. As explained in Chapter 9, there are actual zero-coupon Treasury securities with a maturity greater than one year that are outstanding in the market. These securities are not issued by the U.S. Treasury but are created by market participants from actual coupon Treasury securities. It would seem logical that the observed yield on zero-coupon Treasury securities can be used to construct an actual spot-rate curve. However, there are problems with this approach. First, the liquidity of these securities is not as great as that of the coupon Treasury market. Second, there are maturity sectors of the zero-coupon Treasury market that attract specific investors who may be willing to trade yield in exchange for an attractive feature associated with that particular maturity sector, thereby distorting the term-structure relationship.