On February 2nd, 2017, Apple (AAPL) Corporation issued a senior, unsecured bond with a maturity in 2047. The coupon rate on the new bond is 4.25% fixed paying semi-annual interest on February 9th and August 9th. At the time of issue the bond received a AA+ rating from Standard & Poor's and Aa1 rating from Moody's. The amount raised through this bond issue was $1 billion. In the first quarter of 2017, Apple saw a net income growth rate of 4.88% reflecting a new profit margin of 20.85%. In May 2017, Apple announced an increase in share buy backs from $175 billion to $210 billion and 10.5% dividend increase from $0.57 to $0.63. The bond does not have any protective covenants. The call feature is structured in such a way making a call not very likely at this time.

a-1: If today, a bondholder's required rate of return for Apple's bond is 5.15%, find the intrinsic value for the bond. Show your calculator keystroke variables used to solve for the intrinsic value.

a-2: Given the information in part a, would this bond sell at a discount or a premium? Explain your answer.

a-3: If Apple's bond is today quoted at 89, should the investor purchase the bond today? Explain your answer.

b-1: If today, a different bondholder's required rate of return for Apple's bond is 3.15%, find the intrinsic value for the bond. Show your calculator keystroke variables used to solve for the intrinsic value.

b-2: Given the information in part b, would this bond sell at a discount or a premium? Explain your answer.

b-3: If Apple's bond is today quoted at 118.4, should the investor purchase the bond today? Explain your answer.

c. Which required rate of return (5.15% or 3.15%) is most likely to be a correct required rate of return in today's bond market? Justify your answer.