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Running head: BOND MARKET 1 BOND MARKET Name Instructor Institutional Affiliation Date

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BOND MARKET 2 BOND MARKET The goal of this case study is to get you to look at this bond from both the company’s and the bondholder/investor’s standpoint. Details: Ford Motor Credit Company has issued a bond with the following details: Amount: \$7.4 billion Coupon Interest Rate: 4.00% Coupon Frequency: Semi-annually Maturity Date: 06/20/2027 Call Date & Call Price: 6/20/2018 @\$100.00 Current Bid Price: \$97.05 Current Offer Price: \$98.05 Credit Rating: Baa2 (Moody’s)/BBB(S&P) Credit Spread: 220 basis points Treasury Yield Curve: Date 1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 03/29/18 1.65 1.73 1.95 2.12 2.28 2.41 2.59 2.72 2.77 2.89 3.01 Questions:
BOND MARKET 3 What is the yield to maturity if you purchase the bond? What is the yield to maturity if you sold the bond? Yield to maturity if you purchase the bond; YTM = Annual interest + annual accretion Market price + par value/2 Annual accretion = par value – market price = 7.4 – 97.05 = Years until maturity 10 =-8.965 = 4%* 2 +-8.965 97.05 + 7.4/2 = 1.85%

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• Spring '13
• Bond market

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