3. If Mr. Putin pays $960 to buy a new 2-year Treasury note (T-note) with a coupon rate of 6%, calculate the YTM (yield to maturity). Show the (condensed) time line and key steps of two methods. For the NS method, show the abbreviated equation/expression.

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A:

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.