Question: Spiro Savings Bank currently holds a government bond valued on
Spiro Savings Bank currently holds a government bond valued on the day of its purchase at $5 million, with a promised interest yield of 6 percent, whose current market value is $3.9 million. Comparable quality bonds are available today for a promised yield of 8 percent. What are the advantages to Spiro Savings from selling the government bond bearing a 6 percent promised yield and buying some 8 percent bonds?
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