Question: Julia bought a 5 - year bond with a face value of GBP 2 , 0 0 0 and a fixed annual coupon rate of

Julia bought a 5-year bond with a face value of GBP 2,000 and a fixed annual coupon rate of 4%. After she purchased this bond, the market interest rate rose to 7,5%. What happened to the price of the bond? Which one of the following statements is incorrect?
The bond price increased as it pays a higher coupon than the market rate.
The bond price decreased due to the new bonds offering a higher yield.
The bond price stayed the same.
The bond price decreased below its face value due to the inverse relationship between the price and the yield.
None of the above.

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