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Bond Yields, Bond Prices, and Discounted Cash Flows

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

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.