Question: Show step-by-step solution and solve manually: 5. A 3-year bond is issued today with principal 100,000 pesos and coupons paid semiannually at the rate of

Show step-by-step solution and solve manually:

5. A 3-year bond is issued today with principal 100,000 pesos and coupons paid semiannually at the rate of 8% per annum. If the YTM is 6% compounded semiannually, what is the price of the bond? Show all semiannual cash flows.

Which is higher: the bond price or the principal? Compare the coupon rate and the YTM. Can you establish a general relationship between the bond price and principal (which one is higher) based on the coupon rate and YTM. Explain or derive mathematically.

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