1. If the interest rate rises, what happens to prices? What happens if a rating agency downgrades a bond?

2. Suppose a firm experiences worse than expected sales, and moves closer to defaulting on its interest payments to bondholders. What will happen to the term structure of interest rates?

3. Suppose a firm issues 2 identical bonds, C and D, except that bond C is callable and is junior debt, whereas bond D is not callable and is senior debt. Which bond should have a higher coupon?