1. EXHIBIT 1 Fixed-Rate Bonds Issued by Pro Star, Inc.

   Bond	Maturity	Coupon	Type of Bond
   Bond #1	1 October 20X3	4.40% annual	Option-free
   Bond #2	1 October 20X3	4.40% annual	Callable at par on 1 October 20X1 and on 1 October 20X2
   Bond #3	1 October 20X3	4.40% annual	Putable at par on 1 October 20X1 and on 1 October 20X2

   All else being equal, if the shape of the yield curve changes from upward sloping to flattening, the value of the option embedded in Bond #3 will most likely:

   	A.	increase
   	B.	decrease
   	C.	remain unchanged

2. EXHIBIT 3 Convertible Bond Issued by Pro Star, Inc.

   Issue Date:	6 December20X0
   Maturity Date:	6 December20X4
   Coupon Rate:	2%
   Issue Price:	$1,000
   Conversion Ratio:	31

   The conversion price of the bond in exhibit 3 is closest to:

   	A.	$26.67
   	B.	$32.26
   	C.	$34.19