From Financial Reporting and Analysis (5th Edition), Lawrence Revsine

"After more than a year of crippling losses and three bailouts from Washington, Citigroup, a troubled giant of American banking, said Friday that it had done something extraordinary: it made money. But the headline numbera net profit of $1.6 billion for the first quarterwas not quite what it seemed. Behind that figure was some fuzzy math. Like several other banks that reported surprisingly strong results this week, Citigroup used some creative accounting, all of it legal, to bolster its bottom line at a pivotal moment . . . Citigroup posted its first profitable quarter in 18 months, in part because of unusually strong results from its trading operations. It also made progress in reducing expenses and improving its profit margins. But the long-struggling company also employed several common accounting tacticsgimmicks, critics call themto increase its reported earnings. One of the maneuvers, widely used since the financial crisis erupted last spring, involves the way Citigroup accounted for the decline in the value of its own debt . . . This strategy added $2.7 billion to the companys bottom line during the quarter, a figure that dwarfed Citigroups reported net income . . . "

Source: Excerpt from E. Dash, Sharp Pencil Lets Citigroup Declare a Profit, The New York Times, April 18, 2009.

Suppose Citigroup had issued at par on January 1, 2005, $500 million of 10-year bonds with a fixed annual interest rate of 6% reflecting the companys financial soundness at the time.

Question: Suppose the market interest rate had increased to 12% by January 1, 2009. Compute the market value of the bonds on that date.