1. 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

   On 19 October 20X0, the market prices of Pro Stars convertible bond and common stock are $1,060 and $37.50, respectively (see Exhibit 3 above). If the market price of Pro Stars common stock falls from its level on 19 October 20X0, the price of the convertible bond will most likely:

   	A.	fall at the same rate as Pro Star's stock price
   	B.	fall but at a slightly lower rate than Pro Star's stock price
   	C.	be unaffected until Pro Star's stock price reaches the conversion price