Hey everyone, I was faced with this problem and I can’t understand why the bond is undervalued instead of overvalued.
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FV = 1,000 PMT = 37.5 N = 12 I/Y = 3% CPT PV = 1,074.66 1,074.66 - 1,011 = 64
The bond is priced at $1,011, however other comparable bond are pricing at $1074.66, so you should buy the bond because it is undervalued.
It’s just the wording that’s a little bit tricky, maybe just read the question again and it’ll click 
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If it sounds stupid to you could you explain it to me please 
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If you calculate the YTM for the first bond you get 7.27% whereas other else equal you only get 6% on the other bond. That means that the price for the first Bond is too cheap (undervalued) and market participants will buy this bond up to a price yielding exactly 6% YTM. So they will purchase this bond until the current price get’s right up to 1,074.
It did not sound stupid to me. I just wanted to post question which I then answered myself during writing. Sorry if you got it wrong.
Omg I get it now thanks.
Sorry, I re-read the question like 10 times and I don’t know why but I read 1011 but in my mind it sounded like 1100 (1100 - 64 is not equal to 1074 but somehow it made sense).
Stupid question, I guess tiredness is taking over.
Thanks everyone.
Thanks for your answer, I think I just need to relax and rest a little haha.