The one-year spot rate is 8 percent and the two-year spot rate is 10 percent. What is the price of a two-year bond that pays an annual coupon of 6 percent? What is the yield to maturity of this bond?

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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.