Question

If you knew the nominal value of bonds of company Baghdad is $ 1,000, the interest rate is 10%, a maturity date of 10 years
required : calculate the value of the bond by 8 years from the due date , and before 3 years from the due date under the rate of return required following:-
1 - the required rate of Return 10%.
2-the rate of return desired is 8%.
3. the required rate of Return 12%

Answer 1

1)	Value of bond if required rate of return is 10%
	Value of Bond	1,000
	(Note: When actual and reuired return are same, value of bond is equal to face value)
2)	Value of bond if required rate Of return is 8%
	Value of Bond	1,115
	Working Note:
	Year	Interest/Principal	PV Factor @8%	Present Value
	1	100	0.926	93
	2	100	0.857	86
	3	100	0.794	79
	4	100	0.735	74
	5	100	0.681	68
	6	100	0.630	63
	7	100	0.583	58
	8	100	0.540	54
	8	1,000	0.540	540
	Value of Bond			1,115
3)	Value of bond if required rate Of return is 12%
	Value of Bond	901
	Working Note:
	Year	Interest/Principal	PV Factor @12%	Present Value
	1	100	0.893	89
	2	100	0.797	80
	3	100	0.712	71
	4	100	0.636	64
	5	100	0.567	57
	6	100	0.507	51
	7	100	0.452	45
	8	100	0.404	40
	8	1,000	0.404	404
	Value of Bond			901