- Option : C
- Explanation : Using a financial calculator, compute the present value as:

N = 3 * 4 = 12, I/Y = 5/4 = 1.25%, PMT = 6/4 = 1.5, and FV =100, CPT PV = ($102.76).

Since the coupon rate is higher than the market rate, the bond is trading at a premium.

- Option : B
- Explanation : Value of zero − coupon bond =Face value/(1 + coupon rate)N = 500/(1.05)10 = $306.96

- Option : A
- Explanation : A bond is priced at premium when the coupon rate is greater than the market discount rate. A bond is priced at discount when the coupon rate is less than the market discount rate.

- Option : B
- Explanation : If coupon rate is equal to market discount rate, the bond is priced at par. If coupon rate is more than the market discount rate, the bond is priced at a premium. If coupon rate is less than the market discount rate, the bond is priced at discount.

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