Suppose the director of the Apple company comes up with an innovative financing plan where the company will issue bonds that pay coupons every 12 months. Suppose this new bond will have a maturity of 10 years.

1. At the time of issue, the market discount rate (annual) equals the coupon rate of 5.5%. How much would an investor be willing to pay for the bond when it is issued, if the face value is $1000?

2. Now suppose exactly one year has passed since the company issued the bond and the market discount rate (annual) is now 6.4%. What is the current price of the bond in the market? You may assume that the first coupon has already been paid.