A GM and a Ford bond both have 4 years to maturity, a $1,000 par value, a BB rating and pay interest semiannually. GM has a coupon rate of 6.1%, while Ford has a coupon rate of 5.4%.

a) The GM bond trades at 89.82 (percent of par). What is the yield to maturity (YTM)?

-answered;

Using Excel (don't enter the thousands separators): =RATE(nper, pmt, pv, fv) =RATE(8, 30.5, -898.18, 1,000) =0.046

Since YTM is always quoted as an APR with semiannual compounding, we need to double the period rate: YTM = 2 * 0.046 = 0.092-

b) What should be the price of the Ford bond (in $)?