Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have ?$1,000 par values and 9% coupon interest rates and pay annual interest. Bond A has 8 years to maturity and bond B have 18 years to maturity.

1) calculate the present value of Bond A if the required rate of return is:

a) 6%

b) 9%

c) 12%

2) calculate the present value of Bond B if the required rate of return is:

a) 6%

b) 9%

c) 12%

3) From your findings in parts a and b? Discuss the relationship between time to maturity and changing required returns.

4) If Lynn wanted to minimize interest rate? risk, which bond should she? purchase? ? Why?