Answer:
YTM = 7.27%
Explanation:
We know,
Yield to Maturity (YTM) = [tex]\frac{I + \frac{M - V_{0} }{n} }{\frac{2M + V_{0}}{3}}[/tex]
Here,
I = Coupon Payment = Coupon Rate × Par Value
M = Par Value
[tex]V_{0}[/tex] = Market value/Current value
n = Number of years/periods.
Given,
M = $1,000
[tex]V_{0}[/tex] = $1,080
I = $1,000 × 8% = $80
n = 15 years
Putting the values into the formula, we can get...
Yield to Maturity (YTM) = [tex]\frac{I + \frac{M - V_{0} }{n} }{\frac{2M + V_{0}}{3}}[/tex]
or, YTM = [tex]\frac{80 + \frac{1,000 - 1,080}{15} }{\frac{2*1,000 + 1,080}{3}}[/tex]
or, YTM = [tex]\frac{80 - 5.33}{1,026.67}[/tex]
or, YTM = 0.072730
Therefore, YTM = 7.27%
