Figure 1 below shows the price and other information of an Apple bond from the site...

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Figure 1 below shows the price and other information of an Apple bond from the site Investing.com Figure 1: Apple 3.85% bond information (from Investing.com) as of 22 July 2022 Apple Inc AAPL 3.85% 04-May-2043 97.161 +1.741 (+1.82%) Investing.com Feb 28, 2022 1 Day Prev. Close Price Open Volume 1-Year Change Day's Range 1 Week Mar 28, 2022 1 Month 95.421 N/A N/A - 19.25% 97.161-97.161 Apr 25, 2022 May 23, 2022 3 Months 8 Months 52 wk Range Coupon Coupon Frequency Next Coupon Date Issue Date 1 Year 88.784-121.344 3.85 Semi-Annual Jun 20, 2022 5 years Maturity Date Rating Duration N/A Yield May 03, 2013 Type Jul 18, 2022 Max Note that bond prices and coupon rates are quoted in % of par. (a) What is the price of the Apple bond on 22 July 2022? 105.000 100.000 97.161 95.000 90.000 85.000 May 04, 2043 N/A 0.04 N/A Fixed (0.5 mark) (b) What coupon payment will bond holders receive from each bond on the next payment date? (0.5 mark) (c) What is the yield to maturity for this bond based on the latest price (from Part (a))? (2 marks) The following data is available on US Government Treasury bonds. Figure 2: US Treasury yields in percent (from Trading Economics) for 22 July 2022 Bonds US 10Y US 4W US 8W US 3M US 6M US 52W US 2Y US 3Y US 5Y US TY US 20Y US 30Y Yield 2.7850 2.18 2.24 2.47 3.01 3.04 3.00 2.95 2.88 2.87 3.25 3.01 (d) Based on the information in Figure 2, what is the credit spread of the 3.85% Apple bond? (0.5 mark) (e) If interest rates in the economy rise, and the yield to maturity on this bond increases to 4.9%, what will happen to the price of the bond? What is the percentage change in its price from 22 July 2022? (f) Is this bond trading at par, at a premium, or a discount? (1 mark) (0.5 mark) (g) What would we expect the price of the bond to be on 22 July 2023 if interest rates stay at current (22 July 2022) level (as in Part (c))? (2 marks) Total Q1: 7 marks Figure 1 below shows the price and other information of an Apple bond from the site Investing.com Figure 1: Apple 3.85% bond information (from Investing.com) as of 22 July 2022 Apple Inc AAPL 3.85% 04-May-2043 97.161 +1.741 (+1.82%) Investing.com Feb 28, 2022 1 Day Prev. Close Price Open Volume 1-Year Change Day's Range 1 Week Mar 28, 2022 1 Month 95.421 N/A N/A - 19.25% 97.161-97.161 Apr 25, 2022 May 23, 2022 3 Months 8 Months 52 wk Range Coupon Coupon Frequency Next Coupon Date Issue Date 1 Year 88.784-121.344 3.85 Semi-Annual Jun 20, 2022 5 years Maturity Date Rating Duration N/A Yield May 03, 2013 Type Jul 18, 2022 Max Note that bond prices and coupon rates are quoted in % of par. (a) What is the price of the Apple bond on 22 July 2022? 105.000 100.000 97.161 95.000 90.000 85.000 May 04, 2043 N/A 0.04 N/A Fixed (0.5 mark) (b) What coupon payment will bond holders receive from each bond on the next payment date? (0.5 mark) (c) What is the yield to maturity for this bond based on the latest price (from Part (a))? (2 marks) The following data is available on US Government Treasury bonds. Figure 2: US Treasury yields in percent (from Trading Economics) for 22 July 2022 Bonds US 10Y US 4W US 8W US 3M US 6M US 52W US 2Y US 3Y US 5Y US TY US 20Y US 30Y Yield 2.7850 2.18 2.24 2.47 3.01 3.04 3.00 2.95 2.88 2.87 3.25 3.01 (d) Based on the information in Figure 2, what is the credit spread of the 3.85% Apple bond? (0.5 mark) (e) If interest rates in the economy rise, and the yield to maturity on this bond increases to 4.9%, what will happen to the price of the bond? What is the percentage change in its price from 22 July 2022? (f) Is this bond trading at par, at a premium, or a discount? (1 mark) (0.5 mark) (g) What would we expect the price of the bond to be on 22 July 2023 if interest rates stay at current (22 July 2022) level (as in Part (c))? (2 marks) Total Q1: 7 marks

Answer rating: 100% (QA)

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