Suppose that the above bank also owns a $ 1 million par value Treasury bond, purchased at

Question:

Suppose that the above bank also owns a $ 1 million Treasury bond, purchased at par, with two years to maturity, paying $ 29,000 in semiannual interest, with a market value of $ 960,000. Determine the incremental cash flow effects if the bank sold this note and bought a two year taxable security yielding 6.2 percent with the proceeds.
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...