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    Bond Yields, Bond Prices, and Discounted Cash Flows

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    1-Bond Yields:
    Night Hawk Co. issued 15-year bonds two years ago at a coupon rate of 9.4 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM?

    2-Bond Prices:
    App Store Co. issued 15-year bonds one year ago at a coupon rate of 6.1 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.3 percent, what is the current bond price?

    3-Discounted Cash Flows Analysis:
    If the appropriate discount rate for the fallowing cash flows is 9.29 percent per year, what is the present value of the cash flow?

    Year Cash Flow
    1 $1,900
    2 2,300
    3 4,500
    4 5,100

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    Solution Preview

    The following problems have been solved using a HP 10BII financial calculator. If you are using another financial calculator, you may have to adjust the inputs accordingly.

    Q1. Bond yield Night Hawk Co.

    N = 13 x 2 = 26 (number of semiannual payments left to maturity)
    PV = 105% of face value $1000 = -$1050 (current price put in as a negative number)
    PMT = 9.4% of $1000 / 2 = 94/2 = $47 (9.4% of face value ...

    Solution Summary

    The expert examines bond yields, bond prices and discounted cash flows.

    $2.19

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