QUESTION 5

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 investor assumes an interest rate volatility of 15% instead of 10%, the bond that would most likely decrease in value is:

   	A.	bond #1
   	B.	bond #2
   	C.	bond #3