Question A)

Assume today is June 1, 2022 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, 2032. The bonds are callable in 1 year at 1050. Inflationary concerns have forced central bankers to raise interest rates globally.

1. Given higher interest rates these bonds now are priced such that their yield to maturity is 3.75%. Given that what would the current price of these bonds be?
2. Is the bond trading at a premium, discount or at par? Explain what your answer means