FSTI Holdings has the following investments in its portfolio, and you have been asked to determine their current market value.

Last week, it bought $50 million (par value) of newly issued 10-year U.S. Government Treasury Notes. They were purchased at par (i.e., exactly the principal amount), and have a 1.7% coupon rate, paid annually. (Hint: Bonds only trade at par when the coupon rate is exactly equal to its required return.)

Calculate the current value of the holdings, using the following assumptions.

The Consumer Price Index report issued this morning suggests that inflation will be 0.1% lower than the market had been previously expected. 10-year Treasury Notes are now trading with a yield of 1.65%.