Bond value and time: Changing required returns 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 \( \mathrm{A} \) if the required return is (1) \( 8 \% \), (2) \( 11 \% \), and (3) \( 14 \% \).

b. Calculate the value of bond \( \mathrm{B} \) if the required return is (1) \( 8 \%,(2) 11 \% \), and (3) \( 14 \% \).>c. From your findings in parts a and \( \mathbf{b} \), complete the following table, and discuss the relationship between time to maturity and changing required returns.

\begin{tabular}{ccc}

Required return & Value of bond A & Value of bond B \\

\hline \( 8 \% \) & \( ? \) & \( ? \) \\

11 & \( ? \) & \( ? \) \\

14 & \( ? \) & \( ? \)

\end{tabular}

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

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

b. Calculate the value of bond \( \mathrm{B} \) if the required return is (1) \( 8 \%,(2) 11 \% \), and (3) \( 14 \% \).>c. From your findings in parts a and \( \mathbf{b} \), complete the following table, and discuss the relationship between time to maturity and changing required returns.

\begin{tabular}{ccc}

Required return & Value of bond A & Value of bond B \\

\hline \( 8 \% \) & \( ? \) & \( ? \) \\

11 & \( ? \) & \( ? \) \\

14 & \( ? \) & \( ? \)

\end{tabular}

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

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Personal finance: Bond value and time-changing required returnsLG 5; Challengea.b.c.The greater the length of time to maturity, the more responsive the market value of the bond to changing required returns, and vice versa.d. If Lynn wants to minimize interest rate risk in the future, she would choose Bond A with the shorter maturity. Any change in interest rates will impact the market value of Bond A less than if she held Bond \mathrm{B}. ...