As you realize corporations issue long-term debt in the form of bonds all the ti

Question

As you realize corporations issue long-term debt in the form of bonds all the time. In Chapter Three we are told that there are different characteristics of these bonds that affect their yields. Given the following bond listing for Ford Motor Credit Company, list and explain the debt characteristics (Credit (default) risk, Liquidity, Tax Status, Term to maturity, Call feature, Conversion feature) as they relate to this bond and if they are adding or subtracting from the yield on this bond. There is a copy of Moody’s recent report on the Ford Motor Credit Company’s Bond that will help you with your answers.

Ford Motor Credit Company OVERVIEW

Price: $99.350 per $100 of par value

Coupon (%): 4.903%

Maturity Date: 20-Aug-2023

Yield to Maturity (%): 4.395

Current Yield (%): 4.278

Moody’s Ratings*: Baa2

Coupon Payment Frequency: Semi-Annual First

Coupon Date: 20-Feb-2019

Type: Corporate

Callable: No *

https://research.ameritrade.com/grid/wwws/common/reports/moodyreport.asp?YYY600_SDMuF4C9fhdMSyFm95jfK3MHDKn4rQdNQ7qgwxEiOaKp+TRWk2mcNgIbEGpA88hVRj1yQqvUbMLIXpNav8DLItWr/hANUUDIgc+YYB6vPXQx47ORI2LYfA==&c_name=invest_VENDOR

Explanation / Answer

Solution:

Ford Motor Credit Company

Price: $99.350 per $100 of par value

Coupon (%): 4.903%

Maturity Date: 20-Aug-2023

Yield to Maturity (%): 4.395

Current Yield (%): 4.278

Moody’s Ratings*: Baa2

Coupon Payment Frequency: Semi-Annual First

Coupon Date: 20-Feb-2019

Type: Corporate

Callable: No *

We can analyse the corporate bond based on various criteria and these are given below

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