Bond value and time: Changing required returns Lynn Parsons is considering invetsin in either of two outstandin bonds. The bonds have $1,000 par values and 11% coupon interst rates and pay annual interest. Bond A has exactly 5 year to maturity, and bond B has 15 years to maturity.

a. Calculate the value of bond A if the required return is (1) 8%, (2) 11%, and (3) 14%

b. Calculate the value of bond B if the required retun is (1) 8%, (2) 11%, and (3) 14%

c. From your findings in parts a and b, complete the following table, and discuss the relationship between time to maturity and changing required returns.

Required Return Value of Bond A Value of Bond B

8% ? ?

11% ? ?

14% ? ?

d. If Lynn wanted to minimize interest rate risk, which bond should she purchase? Why?