Answer:
YTM = 4.795%
Explanation:
The formula for yield to maturity (YTM) is given as follows.
YTM = [C + (F - P)/N) / [(F + P)/2] where
C = Coupon payment
F = Face value of bond
P = Price of bond
N = Time to maturity
In the given scenario, note that the payments are semi-annual. Therefore:
C = 2.7% x 1000 = $27
F = $1000
P = 106% x $1000 = $1060
N = (15 - 2) x 2 = 26
YTM = [$27 + ($1000 - $1060) / 26] / [($1000 + $1060) / 2]
= $24.692 / $1030
= 2.3973%
In yearly terms, YTM = 2.3973% x 2
= 4.795%
