Anil Patel is considering investing in either of two outstanding bonds. The bonds both have 10,000 par values and 10% coupon rates and pay annual interest. Bond A has exactly five years to maturity, while bond B has 13 years to maturity.

a. What should be the value of bond A if the required return is (1) 7%, (2) 10%, and (3) 12%?

b. What should be the value of bond B if the required return is (1) 7%, (2) 10%, and (3) 12%?

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.

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Required return value of bond A Value of bond B ? ? 2 ? 2 2 7% 10% 12%