Problem 2 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 8% coupon 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) 12%, and (3) 14%. b. Calculate the value of bond B if the required return is (1) 8%, (2) 12%, 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. Required return Value of bond A Value of bond B 8% ? ? 11 14 ? ? ? ? d. If Lynn wants to minimize interest rate risk, which bond should she purchase? Why?