Question 8 The table below shows the term structure of the zero-coupon, risk-free, interest rates \begin{tabular}{l} Term Zero \\ (years) yield (\%) \\ \hline 15.50 \\ 25.70 \\ 35.85 \\ 46.40 \\ 56.95 \end{tabular} The table below shows the term, in years, the annual coupon rate and the price of 5 risk-free bonds. All bonds have a face falue F=1000 and all bonds with a positive coupon rate make one annual coupon payment. Term, Coupon and Price A 1 and 0.00 and 947.87 B 2 and 3.50 and 1009.56 C 3 and 8.00 and 1108.08 D 4 and 7.00 and 1022.90 E 5 and 6.00 and 915.52 Are some of these bonds mispriced with respect to the arbitrage-free prices we obtain using the vield curve? An overvalued bond is a bond for which the posted price is at least $5 greater than the price obtained with the yield curve. An undervalued bond is a bond for which the posted price is at least $5 smaller than the price obtained with the yield curve. Otherwise, a bond is considered as correctly priced. - A. Bond A is correctly priced, Bond B is overvalued compared to its arbitrage-free price. Bond C is overvalued compared to its arbitrage-free price, Bond D is correctly priced. Bond E is undervalued compared to its arbitrage-free price. - B. Bond A is overvalued compared to its arbitrage-free price, Bond B is correctly priced. Bond C is correctly priced, Bond D is overvalued compared to its arbitrage-free price. Bond E is undervalued compared to its arbitrage-free price. - C. Bond A is overvalued compared to its arbitrage-free price, Bond B is undervalued compared to its arbitrage-free price, Bond C is undervalued compared to its arbitragefree price, Bond D is overvalued compared to its arbitrage-free price, Bond E is correctly priced. - D. Bond A is undervalued compared to its arbitrage-free price, Bond B is correctly priced, Bond C is correctly priced, Bond D is undervalued compared to its arbitrage-free price, Bond E is overvalued compared to its arbitrage-free price