The correct answer is B because the bond's price is the present value of its promised cash flows, calculated as follows:

1. Year 1 Coupon Payment: $4,000 / (1 + 5%)^1 = $3,809.52
2. Year 2 Coupon Payment: $4,000 / (1 + 5%)^2 = $3,628.12
3. Year 3 Coupon Payment + Principal: $104,000 / (1 + 5%)^3 = $89,839.11

Total Price: $3,809.52 + $3,628.12 + $89,839.11 = $97,276.75 ≈ $97,277

Calculator Inputs:

• FV = $100,000
• I = 5%
• N = 3
• PMT = $4,000
• PV ≈ $97,277

Why Other Options Are Incorrect:

• A: This ignores the coupon payments for years 1 and 2, leading to an undervalued price.
• C: This incorrectly swaps the coupon rate and market discount rate, resulting in an overvalued price.