From the CFAI book: Example 2: "A fixed-income trader at a hedge fund observes a 3-year, 5% annual payment corporate bond trading at 104 per 100 of par value. The research team at the hedge fund determines that the risk-neutral probability of default used to calculate the conditional POD for each date for the bond is 1.50% given a recovery rate of 40%. The government bond yield curve is flat at 2.50%.

Based on these assumptions, does the trader deem the corporate bond to be overvalued or undervalued? By how much? If the trader buys the bond at 104, what are the projected annual rates of return?"

The exposure to 1 year bond is calculated as 5 + 5/(1.025)^{2} +105/(1.025)^{3} = 109.8186

and year 2 is calculated as 5/ (1.025)+ 5/(1.025)^{2} +105/(1.025)^{3}

it says that “The exposure is 109.8186 for date 1 when two years to maturity remain” so wouldnt it be 5+5 +105/(1.025)^{3}

I am not able to understand is I have to divide and find the PV as usual way. Please help me understand the flow of the calculation. thanks you