1. A client is reviewing a year-end portfolio report. Since the beginning of the year, market yields have increased slightly. In comparing the beginning-of-the-year price for the bonds selling at a discount from par value to the end-of-year prices, the client observes that all the prices are higher. The client is perplexed since he expected that the price of all bonds should be lower since interest rates increased. Explain to the client why the prices of the bonds in the portfolio selling at discount have increased in value.