1. A 10-year annual payment corporate bond has a market price of $1,050. It pays annual interest of $100 and its required rate of return is 9 percent. Is the bond correctly priced, overpriced, or underpriced? If it is overpriced or underpriced, then list by how much. Provide steps A) Correctly priced P B) Overpriced by $14.18 SEP C) Underpriced by $14.18 SEP D) Overpriced by $9.32 SEP E) Underpriced by $9.32

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Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.