Because most of the bond's payments occur in the future,the present Discounted value declines as the interest rare increases. For example,when the interest rate is 5 percent,the PDV of a 10-year bond paying $100 per year on a principal of $1000 is $1386 Because most of the bond's payments occur in the future, the present Discounted va1ue declines as the interest rare increases. For example, when the interest rate is 5 percent, the PDV of a 10-year bond paying $100 per year on a principal of $1000 is $l386