Final answer:
The yield to maturity (YTM) on the bond is approximately 13.19%.
Step-by-step explanation:
The yield to maturity (YTM) of a bond is the total return an investor can expect if they hold the bond until maturity and reinvest all coupon payments at the same rate.
To calculate the YTM, we need to compare the current price of the bond with the future cash flows it will provide.
In this case, the bond has a face value of $1000, a coupon rate of 7.9% with annual coupons, and is currently trading at $934.
The coupon payment each year will be 7.9% of the face value, which is $79. The bond has 2 years left to maturity, so there will be 2 coupon payments of $79 and a final payment of $1079 (which is the face value plus the last coupon payment).
To calculate the YTM, we can use the formula:
YTM = (Annual coupon payment + (Face value - Current price) / Years to maturity) / (Face value + Current price) / 2
Plugging in the values, we get:
YTM = (79 + (1000 - 934) / 2) / (1000 + 934) / 2
= 0.1319, which is approximately 13.19%.