Face Value of bond = $1,000
Coupon rate = 7%
C = Semi annual Coupon payment = $1,000 * 7%/2 = $35
r = Semi annual yeild to maturity = 8%/2 = 4%
n = 12*2 = 24 semi annuals
Market Value of bond today = [C * [1 - (1+r)^-n] / r] + [Face Value / (1+r)^n]
= [$35 * [1 - (1+4%)^-24] / 4%] + [$1,000 / (1+4%)^24]
= [$35 * 0.609878526 / 0.04] + [$1,000 / 2.88336858]
= $533.64371 + $390.121475
= $923.765185
Market Value of bond today is $923.77
Amount needed = $2,000,000
Bonds need to be issued = Amount needed / Market Value of bond
= $2,000,000 / $923.77
= 2,165.041018
= 2,166
Therefore, bonds need to be issued are 2,166
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