Bond value and

timelong dash$$Changing

required returns$$Personal Finance Problem $$Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have

$$$$1$ comma $0001,000$

par values and

$1111\%$

coupon interest rates and pay annual interest. Bond A has exactly

$99$

years to$$ maturity, and bond B has

$1919$

years to maturity.$$

a$.$Calculate the present value of bond A if the required rate of return$$ is: $(1)$

$88\%,$

$(2)$

$1111\%,$

and$(3)$

$1414\%.$

b$.$Calculate the present value of bond B if the required rate of return$$ is: $(1)$

$88\%,$

$(2)$

$1111\%,$

and$(3)$

$1414\%.$

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?