Questions:
How do you compute the value of a bond based on its:

C = coupon payment per period
r = market interest rate
n = Number of Coupon Payments in A Year
t = Number of Years until Maturity
F = the face value of the bond

William is a portfolio manager whose investment strategy is primarily in bonds in an emerging market. He is trying to find underpriced bonds to invest $500 million of spare cash to generate stable cash flows for clients over the next 5 years. He has the following options in the market. 

| Bond   | Payment Frequency | Coupon Rate | Trading Price |
|--------|--------------------|--------------|---------------|
| Bond 1 | Semiannual         | 3.0%        | $1010        |
| Bond 2 | Annual             | 3.5%        | $1079        |
| Bond 3 | Quarterly          | 3.6%        | $1080        |
| Bond 4 | Semiannual         | 2.8%        | $990         |
| Bond 5 | Quarterly          | 2.4%        | $1005        |


All the bonds have a par value of $1000 and a time to maturity of five years. The benchmark yield in the bond market is 2%. Which, if any, of these bonds are underpriced according to these assumptions?

Reference answers:
Using the variables you provided, you can compute intrinsic value of a bond using the following formula:

Bond Price = C * [1-(1+r/n)^-n*t] / r/n + (F / (1 + r/n)^n*t

Using this formula, following are the intrinsic values of the bonds.

Bond 1. $1047 (under-priced)
Bond 2. $1070 (over-priced)
Bond 3. $1075 (over-priced)
Bond 4. $1028 (under-priced)
Bond 5. $1018 (under-priced)

Bonds 1, 4 and 5 meet the objectives of William as they are underpriced in the market.