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Write the payment dates first
Consider an original annual-payment promise: 5 at year one, 5 at year two and 105 at year three. The final amount contains the last coupon and principal. Separate those dates before choosing rates; three payments do not automatically mean three identical rates.
Convert rates into dated factors
For annual effective spot rates of 4%, 5% and 6%, the corresponding factors are 0.961538, 0.907029, 0.839619. The exponent is the time from today to that payment. A two-year rate governs a two-year accumulation, rather than just the second year.
| Year | Payment | Annual spot rate | Discount factor | Present value |
|---|---|---|---|---|
| 1 | 5 | 4% | 0.961538 | 4.807692 |
| 2 | 5 | 5% | 0.907029 | 4.535147 |
| 3 | 105 | 6% | 0.839619 | 88.160025 |
Add comparable present amounts
The schedule has present value 97.502864 per 100 principal under the supplied factors. Each row is measured at today’s date. Adding undiscounted amounts would instead add money from different dates without a valuation conversion.
Keep the payment and curve assumptions visible
This exercise assumes the stated payments occur, uses annual intervals, and omits accrued interest, default and options. A benchmark curve alone does not supply an issuer credit adjustment. The same numerical schedule should not be presented as an executable market quote.