Answer: $97,277.

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.

Author: LeetQuiz Editorial Team