A $1,000 Ford bond carries a coupon rate of 8%, payable semi-annually and has 18 years until maturity. It has a yield to maturity (YTM /yield rate) of 6%.

1. What price does the bond sell for?
2. What will the price be if the bond yield rises to 7%?
3. What will the price be if the bond yield drops to 5%?
4. If Ford significantly reduced the amount of debt on its balance sheet, what would likely happen to the price of the bond? Explain.
5. If Ford defaulted on an interest payment, what would likely happen to the yield rate? Explain.
6. 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.