INDICATIVE MID RATES OF SELECTED AUSTRALIAN GOVERNMENT SECURITIES, assignment help

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(a) On the 1st September 2015, you bought the following portfolio of Commonwealth Government bonds. Calculate the amount you paid for each instrument per $100 face value and thus the total for the equally weighted portfolio:  Use the yields given.

F16 INDICATIVE MID RATES OF SELECTED AUSTRALIAN GOVERNMENT SECURITIES

Title

Treasury  Bonds

Treasury  Bonds

Treasury  Bonds

Treasury  Bonds

Treasury  Bonds

Description

Treasury Bond

120

6.00%

15-­Feb-­2017

Treasury Bond 141

3.25%

21-­Oct-­2018

Treasury Bond 124

5.75%

15-­May-­2021

Treasury Bond 139

3.25%

21-­Apr-­2025

Treasury Bond 144

3.75%

21-­Apr-­2037

Frequency

Daily

Daily

Daily

Daily

Daily

Type

Original

Original

Original

Original

Original

Units

Per cent per annum

Per cent per annum

Per cent per annum

Per cent per annum

Per cent per annum

01-­Sep-­2015

1.790

1.765

2.130

2.640

3.275

31-­May-­2016

1.700

1.665

1.820

2.250

2.925

(b)Calculate the price of the instruments if they were sold on 31st May 2016

(c)Calculate the holding period yield for each instrument if you sold them on the  31st  May  2016.  Assume  the  reinvestment  rate  is  1.75% p.a.  for  the bonds.

(d)What would be the holding period yield for the portfolio as a whole over the same period? Comment on your answer

(e)Using a table format, manually calculate the duration and convexity for the 3.25% 21st April 2025 Treasury Bond 139 on the 21st April 2016, if the yield was 2.545%.

(f)Using a spreadsheet (Excel) and its duration formula, calculate the duration for all the bonds as at 31st May 2016.

(g)What is the duration for the portfolio?

(h)If the portfolio had 60-­day Bank Accepted bill with a yield of 1.34%, what would be the bill’s duration?  Explain you answer.  

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