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# Present value bond calculation

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You are the owner of 100 bonds issued by Euler, Ltd. These bonds have 8 years remaining to maturity, an annual coupon payment of \$80, and a par value of \$1,000. Unfortunately, Euler is on the brink of bankruptcy. The creditors, including yourself, have agreed to a postponement of the next 4 interest payments (otherwise, the next interest payment would have been due in 1 year). The remaining interest payments, for Years 5 through 8, will be made as scheduled. The postponed payments will accrue interest at an annual rate of 6 percent, and they will then be paid as a lump sum at maturity 8 years hence. The required rate of return on these bonds, considering their substantial risk, is now 28 percent. What is the present value of each bond?

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https://brainmass.com/economics/bonds/present-value-bond-calculation-101328

#### Solution Preview

The present value is \$266.88.

To solve, first find the compounded value at Year 8 of the postponed ...

\$2.19