Please look at the attached image and then answer the following:

What do you notice about the shape of the bonds on the plot? Does this have a name? Why do you see these curves as they are (i.e., what explains the relative shapes)?

3,500 3,000 2,500 2,000 1,500 1,000 Bond A price Bond B price 500 0 0% 5% 10% 15% 20% 25%