Normally, this book does not appear in the game. However, it appears that you are playing the original version with patch adding unused items (which also adds Magic Cape and Mighty Boomerang) or alternative "Master Quest" version of the game (which includes this patch by default).
Warp to Dungeon 5, then go north-east. You should find a bombable wall. Place a bomb, then go inside the cave. Move the blocks to access four treasure chests. Inside you will find 100 rupees, Piece of Heart and the Book of Mudora.