1. 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 5.9%.

a. The GM bond trades at 88.6 (percent of par). What is the yield to maturity (YTM)?

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

2. A corporate bond pays interest twice a year and has 18 years to maturity, a face value of $1,000 and a coupon rate of 5.6%. The bond's current price is $1,336.29. It is callable starting 12 years from now (years to call) at a call price of $1,046.

a. What is the bond's (annualized) yield to maturity?

b. What is the bond's (annualized) yield to call?

c. If you buy the bond today and hold it as long as possible, which rate of return can you expect to earn?

-A The yield to maturity (YTM)

-B The yield to call (YTC)