(a) On the 1^st July 2022, 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.

Title	Treasury Bonds	Treasury Bonds	Treasury Bonds	Treasury Bonds	Treasury Bonds	Treasury Bonds
	Treasury Bond 137 2.75% 21-­Feb-­2024	Treasury Bond 142 4.25% 21-­Apr-­2026	Treasury Bond 154 2.75% 21-­Nov-­2029	Treasury Bond 165 1.75% 21-­Nov-­2032	Treasury Bond 144 3.75% 21-­Apr-­2037	Treasury Bond 162 1.75% 21-­Jun-2051
01-July -­2022	2.294	2.938	3.745	3.497	2.098	1.464
31-­June-­2023	2.511	2.130	3.806	2.593	3.954	2.500

(b)Calculate the price of the instruments if they were sold on 31^st June 2023

(c)Calculate the holding period yield for each instrument if you sold them on the 30 ^th of June 2023. Assume the reinvestment rate is 1.548% 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 3.75% 21^st April 2037 Treasury Bond 144 on the 21^st April 2023, if the yield was 3.611%.

(f)Using a spreadsheet (Excel) and its duration formula, calculate the duration for all the bonds as at 30^th.of June 2023.

(g)What is the duration for the portfolio as at 30^th of June 2023?

(h)If the portfolio had 44-­day Bank Accepted bill with a yield of 1.158%, what would be the bill’s duration? Explain you answer.

(i) Comparing the two sets of rates, what can you say about the term structure? 

Answer rating: 100% (QA)

a On the 1st July 2022 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 weigh... View the full answer