Detailed Answer
(c) The requirement is to identify the impact of changes
in the market rate of interest on bond valuation. Answer (c) is
correct because if the market rate of interest increases, the bond
value will decrease (an inverse effect). Answers (a) and (b) are
incorrect because the coupon rate does not change after issuance
and determines the amount of the periodic interest payments,
not changes in the bond valuation. Answer (d) is incorrect because
if the market rate decreases, the value of the bond will increase.
