A 12-year annual payment corporate bond has a market price of $925. It pays annual interest of $60 and its required rate of return is 7%. By how much is the bond mispriced?
A) $0.00
B) Overpriced by $7.29
C) Underpriced by $7.29
D) Overpriced by $4.43
E) Underpriced by $4.43 FPV = 60 * PVIFA [7%, 12 yrs] + 1000 * PVIF (7%, 12 yrs) = $920.57
Correct Answer:
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