Question: The 40 par value bond with maturity in two years and 5 semi-annual coupon is trading for 50. If the Yield to maturity is 7%,

The 40 par value bond with maturity in two years and 5 semi-annual coupon is trading for 50. If the Yield to maturity is 7%, the bond is:

  1. A) Over-valued

  2. B) Fairly-valued

  3. C) Under-valued

  4. D) Over-valued or undervalued applies only to stocks priced through CAPM.

  5. E) Insufficient Information

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