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17 May, 13:19

Assume that Ford Motor Company issues a recall on all models built between 2010 and 2015 because of a major malfunction in driver-side airbags. Place the events below in the correct order.

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  1. 17 May, 16:29
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    The order of sequence will be as follows.

    1) Ford's default risk on bond payments increases.

    2) The demand for Ford's corporate bonds decreases.

    3) The price of Ford's bonds decreases.

    4) The interest rate on Ford's bonds increases.

    Because, once the Ford returns all its vehicles, a negative tsunami is going to flow through the Fords Value market, buyers, suppliers and so on are going to think it is wrong for the Fords. This will lead to a fall in the demand for bonds, as a negative wave fluctuates around the market. The price directly related to demand often declines as demand decreases. This leads to a decline in the price of fords debt. Ford decides to increase the interest rate on Bond Prices, in order to earn some profit and to balance the cost. Lastly, interest rates have risen because of the risk of default in bond payments, as ford is not now able to pay its debt.
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