Consider a portfolio of bonds with the following characteristics:

Bond A

Term: 5 years Coupon rate: 2%; coupons are paid twice a year (i.e. semi-annual compounding). Face value: $1,000 The current market price is $890. Bond B

Term: 5 years Coupon rate: 5%; coupons are paid twice a year (i.e. semi-annual compounding). Face value: $1,000 The current market price is $980. A portfolio of bonds investing 40% in bond A and 60% in bond B. Assume arbitrage-free conditions.

What is the bond portfolios YTM?