A 6% coupon-paying bond has a face value of $100, yield to maturity of 5% p.a. and 2 years to maturity. Coupons are paid semi-annually. If you buy the bond today at $104, you buy the bond:A.At a gainB.At no gain/lossC.Do not knowD.At a loss

To answer this question, we need to calculate the bond's price based on its yield to maturity (YTM), coupon rate, and time to maturity.

Step 1: Calculate the semi-annual coupon payment The bond pays coupons semi-annually, so the coupon payment is 6%/2 = 3% of the face value. Therefore, the semi-annual coupon payment is $100 * 3$3.

Step 2: Calculate the semi-annual yield to maturity The YTM is also given on an annual basis, so we need to divide it by 2 to get the semi-annual YTM. Therefore, the semi-annual YTM is 5%/2 = 2.5%.

Step 3: Calculate the bond's price The price of a bond is the present value of its future cash flows, which are the coupon payments and the face value at maturity. The formula to calculate the price of a bond is:

P = C * (1 - (1 + r)^-n) / r + FV / (1 + r)^n

where: P = price of the bond C = semi-annual coupon payment r = semi-annual YTM n = number of periods to maturity FV = face value of the bond

Substituting the values into the formula, we get:

P = $3 * (1 - (1 + 2.5$100 / (1 + 2.5%)^4 = $101.92

Step 4: Compare the calculated price with the purchase price The calculated price of the bond is $101.92, but you are buying it at$104. Therefore, you are buying the bond at a loss because you are paying more than what the bond is worth based on its YTM, coupon rate, and time to maturity.

So, the answer is D. At a loss.