1. b. 11.75%
2. The change in interest rates is inversely proportional to the change in the value of the bonds. If the interest rates increase, then the value of the bonds is decreased (because bonds always pay fixed amount of interest) and vice versa. Hence, the given statement is B. FALSE.
3. When coupon rate is more than the yield to maturity, then demand for the bond raises and hence, it is sold at premium and vice versa. So, a bond will sell at discount when coupon rate is less than yield to maturity, at premium when coupon rate exceeds yield to maturity, and at par when coupon rate is equal to yield to maturity.
Hence, the answer is a.
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