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Bond value and time: Changing required returns Lynn Parsons is considering investing in either of...

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Accounting

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 rates and pay annual interest. Bond A has exactly 5 years to maturity, and bond B has 15 years to maturity. Calculate the value of bond A if the required return is (1) 8%, (2) 11%, and (3) 14%. Calculate the value of bond B if the required return is (1) 8%, (2) 11%, and (3) 14%. 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 ? ? If Lynn wants to minimize interest rate risk, which bond should she purchase? Why?

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