Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1,000 par values and 9% coupon interest rates and pay annual interest. Bond A has exactly 10 years to maturity, and bond B has 20 years to maturity.

a.Calculate the present value of bond A if the required rate of return is: (1) 6%, (2) 9%, and (3) 12%.

b.Calculate the present value of bond B if the required rate of return is: (1) 6%, (2) 9%, and (3) 12%.

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

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