A bank purchases 10-year Treasury bonds at their par value of $1,000 and a coupon interest rate of 1% per annum with coupon payments made annually.

(a) Calculate the coupon interest payments.

(b) Suppose market yields rise to 3% per annum due to a rise in market interest rates and the bank sells the bonds at the beginning of the second year. What is the intrinsic price for the bonds?

(c) Explain why there is an interest rate risk for bond buyers.