A Treasury bond that settles on August 10, 2016, matures on September 27, 2021. The coupon rate is 4.6 percent and the quoted price is 107:7. What is the bond's yield to maturity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

3.09%

Explanation:

Yield to maturity = [C + ((F - P) / n) ] / [ (F + P) / 2]

Face value = $1,000

C = Coupon or interest payment = $1,000 * 4.6% = $46

P = quoted price = $1,000 * 107% = $1070

n = Years to maturity = 5

Therefore, we have:

Yield to maturity = [46 + ((1,000 - 1,070) / 5) ] / [ (1,000 + 1,070) / 2] = 0.0309. or 3.09%