Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1,000 par values and 11% coupon interest rates and pay annual interest. Bond A has exactly 5 years 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 return 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.
![1459_x.jpg](https://secure.tutorsglobe.com/CMSImages/1459_x.jpg)
d. If Lynn wanted to minimize interest rate risk, which bond should she purchase?Why?