This graph shows the value of 10% coupon bonds of different terms across differing market interest rates. Each bond pays INT = $100 at the end of each year and returns M = $1,000 at maturity. For comparison, the blue line depicts the value of a one-year bond. The term of the other bond in years may be changed using the slider.

1. What is the value of a 15-year 10% $1,000 coupon bond when the market interest rate is 15%?

1. $421
2. $708
3. $1,000
4. $1,519

2. What is the value of a 12-year 10% $1,000 bond when the market interest rate is 5%?

1. $1,000
2. $1,050
3. $1,443
4. $2,200

3. What is the value of a 10-year 10% $1,000 bond when the market interest rate is 10%?

1. $900
2. $975
3. $1,000
4. $1,050

4. For a 10% $1,000 coupon bond, when the market interest rate is greater than 10%, the value of the bond:

1. Is unaffected and still equals its par value of $1,000.
2. Is less than its par value of $1,000.
3. Is greater than its par value of $1,000.
4. Cannot determine because it depends on the term of the bond in years.

5. For a 10%, $1,000 coupon bond, a longer term bond (say, 15 years) is:

1. less affected by changes in the market rate than a 1-year bond.
2. affected the same by changes in the market rate than a 1-year bond.
3. more affected by changes in the market rate than a 1-year bond.
4. Cannot be determined.

rs INT Yrs INT $100 $1000 t=1 (1+ra)" (1+rd)Yrs - = 5 + (1+0.051) = 1,505 (1+0.051)15