Bonds: Bond A Bond B Initial Price of Bonds when k = 9% $743.29 $1,064.18 Price of Bonds when k = 7% $859.53 $1,210.71 Bonds with a Coupon Rate of: Bond A Bond B Now suppose that instead the U.S. announces that it expects the unemployment rate to decrease significantly this year, which results in an investor's required rate of return on a bond to increase to 12%. Initial Price of Bonds when k = 9% $743.29 $1,064.18 Percentage Change in Bond Price Using this information, fill in the values for the percentage change in bond price, percentage change in k, and bond price elasticity for each bond in the table. Price of Bonds when k = 12% $604.48 $887.00 Based on the calculations, it can be said that the bond price elasticity is between interest rate movements and bond price movements. Percentage Change in k Percentage Change in Bond Price Based on the calculations, it can be said that a bond with a high required rate of return is of return. The price elasticity of bond A with a required rate of return of 7 percent can be interpreted as: O A 1 percent decrease in interest rates leads to a 0.704 percent decrease in the price of the bond. O A 1 percent increase in interest rates leads to a 0.704 percent decrease in the price of the bond. O A 1 percent increase in interest rates leads to a 0.704 percent increase in the price of the bond. O A 1 percent increase in interest rates leads to a 0.620 percent decrease in the price of the bond. Bond Price Elasticity (Ps") Percentage Change in k in each scenario, which reflects Bond Price Elasticity (P) relationship price sensitive than a bond with a low required rate

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