You observe the following sovereign bonds.

Time to maturity Coupon Yield to maturity

Bond A 1 year 5% 2.342%

Bond B 1 year 0% 2.350%

Bond C 2 years 5% 2.496%

Bond D 2 years 0% 2.500%

Bond E 3 years 5% 2.711%

Bond F 3 years 0% 2.725%

Determine whether Bond E is overvalued, undervalued or fairly valued. All coupons are paid

annually.