Question
Assume today is June 1, 2023 and that all bonds pay interest annually with a face value of $1,000. YTM = Current yield + Capital
Assume today is June 1, 2023 and that all bonds pay interest annually with a face value of $1,000. YTM = Current yield + Capital Gains yield; CY = Annual Interest/Current Price Apple is AA rated; AAA Treasuries yield 1-year is 2.75%, 10-year 3.25% 2 Years ago, Apple issued 2.0% coupon paying bonds with a face value of $1000 set to mature on June 1, 2033. The bonds are callable in 1 year at 1050. Inflationary concerns have forced central bankers to raise interest rates globally. What is the capital gains yield of this bond and interpret what the sign of the CGY means? Show your work.
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