Oops! yes that is a bug. I am somewhat surprised that no-one else has hit this problem before, since it is pretty serious. I have created a bug report MDL-37847 to track solving it.
I am very sorry about this. The good news is that I am 99% sure that response the student entered is correctly stored in the database. The bug is only with the way it is displayed. So, once the bug is fixed, all will be will.