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. 9. What would happen to the price of the bond if the required rate of return for the bond moved back to 2.0%. Be specific! No Calculation Required 10. If an investor purchases this bond today and reinvests all the income received (coupon payments) at 4% (this is an annual reinvestment rate), and assuming that the issuer does not default, which of the following are true? Assume in this question that the bond is not called. a) The annualized total rate of return will be greater than initially calculated in 1 b) The annualized total rate of return will be less than initially calculated in 1 c) The annualized total rate of return will be exactly what you calculated in 1 d) It cannot be determined 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. 9. What would happen to the price of the bond if the required rate of return for the bond moved back to 2.0%. Be specific! No Calculation Required 10. If an investor purchases this bond today and reinvests all the income received (coupon payments) at 4% (this is an annual reinvestment rate), and assuming that the issuer does not default, which of the following are true? Assume in this question that the bond is not called. a) The annualized total rate of return will be greater than initially calculated in 1 b) The annualized total rate of return will be less than initially calculated in 1 c) The annualized total rate of return will be exactly what you calculated in 1 d) It cannot be determined