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.

$\backslash$table$[[$Required return,Value of bond A$],[8\%,?$