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What price does the bond sell for

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Reference no: EM132755202

Question - A Ford bond carries a coupon rate of 4%, payable semi-annually and has 20 years until maturity. It has a yield to maturity (YTM /yield rate) of 10%.

Q1. What price does the bond sell for?

Q2. What will the price be if the bond yield rises to 12%?

Q3. If Ford significantly increased the amount of debt on its balance sheet, what would likely happen to the price of the bond?

Q4. If Ford defaulted on an interest payment, what would happen to the coupon rate?

Q5. Give two specific business reasons specific to Ford that could cause the yield rate to decrease on the Ford bond.

Q6. As a bond trader, what is your strategy when purchasing Ford bonds-what are you 'betting' on?

Q7. The yield on Ford bonds decreased 0.5% the day before they were to be sold to the market. Would the CFO of Ford be happy or sad? Explain.

Reference no: EM132755202

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