What does a Treasury Note at 105:16 mean?

If an investor purchases a 8 1/2s 2001 Feb. $10,000 par Treasury Note at 105:16 and holds it for exactly one year, what is the rate of return if the selling price is 105:16?

Your answer: D was incorrect. The correct answer was A) 8.06%.

Purchase Price = [(105 + 16/32)/100] x 10,000 = $10,550.00

Selling price = [(105 + 16/32)/100] x 10,000 = $10,550.00

Interest = 8 1/2% of 10,000 = $850.00

Return = (P end - P beg + Interest)/P beg = (10,550.00 - 10,550.00 + 850.00)/10,550.00 = 8.06%