Assume that you wish to purchase a 30-year bond that has a maturity value of $1,000 and a coupon interest rate of 10%, paid semiannually. If you require 8% rate of return on this investment, what is the maximum price that you should be willing to pay for this bond?

a. $1,111

b. $1,450

c. $1,352

d. $1226

5. Based on the above question, if the market price of this bond is $1200 per bond, which of the following statement is right?

1. The bond is overpriced and should be sold
2. The bond is underpriced and should be sold
3. The bond is overpriced and should be bought
4. The bond is underpriced and should be bought