3. Bond price elasticity Suppose you want to compare the price sensitivity of two 10 -year bonds. Suppose the producer price index indicates that prices may soon decrease by as much as 1.5 percent, which results in an investor's required rate of return on a bond to decrease to 7%. Using this information, fill in the values for the percentage change in bond price, percentage change in k, and bond price elasticity for each band in the table. Now suppose that instead the producer price index indicates that prices moy soon increase by as much as 1.2 percent, which results in an investor's required rate of retum on a bond to increase to 11%. Using this information, fis in the values for the percentage change in bond price, percentage change in k, and bond price elastioty for each bond in the table. Based on the calculations, it can be said that the bond price elasticty is in each scenario, which reflects relationship between interest rate movements and bond price movements. The price elasticty of bond A with a required rate of return of 7 percent can be interpreted as: A 1 percent increase in interest rates leads to a 0.540 percent decrease in the orice of the bond. A 1 percent increase in interest rates leads to a 0.609 percent decrease in the price of the bond. A 1 percent increase in interest rates leads to a 0.609 percent increase in the price of the bond. A 1 percent decrease in interest rates leads to a 0.609 percent decrease in the price of the bond. Based on the calculations, it can be caid that a bond with a high required rate of return is price sensitive than a bond with a low required rate of tetum. 3. Bond price elasticity Suppose you want to compare the price sensitivity of two 10 -year bonds. Suppose the producer price index indicates that prices may soon decrease by as much as 1.5 percent, which results in an investor's required rate of return on a bond to decrease to 7%. Using this information, fill in the values for the percentage change in bond price, percentage change in k, and bond price elasticity for each band in the table. Now suppose that instead the producer price index indicates that prices moy soon increase by as much as 1.2 percent, which results in an investor's required rate of retum on a bond to increase to 11%. Using this information, fis in the values for the percentage change in bond price, percentage change in k, and bond price elastioty for each bond in the table. Based on the calculations, it can be said that the bond price elasticty is in each scenario, which reflects relationship between interest rate movements and bond price movements. The price elasticty of bond A with a required rate of return of 7 percent can be interpreted as: A 1 percent increase in interest rates leads to a 0.540 percent decrease in the orice of the bond. A 1 percent increase in interest rates leads to a 0.609 percent decrease in the price of the bond. A 1 percent increase in interest rates leads to a 0.609 percent increase in the price of the bond. A 1 percent decrease in interest rates leads to a 0.609 percent decrease in the price of the bond. Based on the calculations, it can be caid that a bond with a high required rate of return is price sensitive than a bond with a low required rate of tetum
