Bond Investment. Assume that three years ago, you purchased a $1.000 corporate bond that pays 3.85 percent. Also assume that three years after your bond investment, comparable bonds are paying 4.50 percent.

1. What is the annual dollar amount of interest that you receive from your bond investment?

2. Assuming that comparable bonds are now paying 4.50 percent, will your bond increase or decrease in value?

3. In your own words, explain why your bond increased or decreased in value.