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. By how much is the bond mispriced?\

bond under priced is  $14.18

Explanation:

given data

market price = $1,050

annual interest = $100

rate of return = 9 percent

time period = 10 year

solution

we get here bond mis priced so for we get first theoretical Price of the bond that is

theoretical Price of the bond  = annual interest × +    ........1

theoretical Price of the bond  = 100 × +    

theoretical Price of the bond  = $1064.18

but actual Price is $1050

so here bond is under priced as  $1064.18 - $1050

bond under priced is  $14.18

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