Rate of return of a Bond

In case of bonds, rather than dividends, investor is entitled to payments of interest yearly or semi-annually. Investor also benefits if there is an appreciation in value of bond, otherwise there is redemption of the bond at par value or at premium. Using present value formula developed above we can say that:

Here interest amount is individually brought to its present value or we could apply the annuity factor table to get its present value. Principal amount is brought to its present value when it is due.

Or to use the tables the change would be:

Present Value = Interest Amount * (Present Value Annuity Factor n, i) + Principal Amount* Present Value Interest Factor _{n, i})