Consider the following figure that shows the time path of the value of a 10% coupon, $1,000 par value bond when interest rates are 5%, 10% and 15%. Bond Value ($) 1,495 Falls and Stays at 5% M = 1,000 Io = Coupon Rate = 10% (Par Bond) M 714 1. Rises and Stays at 15% 0 2 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 Years Remaining Until Maturity In the bonds interest rate falls below the coupon rate (such as 5% here), a fixed-rate bond's price rises above its par value. Such a bond is called a Risky Bond. Income Bond. Premium Bond. Discount Bond