Question 1 (2 marks ): Before selecting securities, it is first important to discuss as a group what sort of portfolio you intend to create. Will you be creating a diversified or concentrated portfolio and why? Discuss with respect to the current economic climate. Ensure you all agree on your answer to this question before moving on as you will be coming back to this answer for guidance. Question 2 (3 marks ): List the bonds you have chosen in a table. Include the name of the corporate issuer, the security name (Typically given on Kikon as: ABC 0.000 01/01/1900), the time to maturity, the yield to maturity, the coupon, the issuance size of the deal, whether the bond is fixed or floating, and the current spread. If it is a fixed rate bond, the required spread is the 'Smap Spread. If the bond is floating, provide the 'Discount Margin'. You can begin by using the CBPX page to search for the bonds and imposing the mandate's restrictions by using the filters on the left-hand side. All the information can be found by clicking on the '18IN' for each security and looking at the description, valuation, and bond calculator (BNDC) pages. Question 3 (2 marks ): Provide a breakdown of the geographic distribution of your portfolio and the allocated weightings in each bond. You may find it useful to use bar or pie charts. How have you allocated the weightings in your portfolio? What are your biggest and smallest holdings ? Does this make sense given your answer inQuestion 1? ( You are free to allocate the weightings in your portfolio in any manner you wish , as long as it makes Question 4 (3 marks ): For each of the issuers derive the following credit metrics and discuss which corporate ap- pears to be the anfeat and which is the riskiest in your portfolio. Use the most recent annual report available for each issuer ( You can typically find annual reports on the investor relations page if they are a public company). Present all the findings in AUD - If the issuer reports in a foreign currency, adjust the results using the prevailing apot exchange rate. For instance, the AUD to USD rate on Kikon is simply AUD/USD. Total Assets Total Equity Total Debt Interest Expense EBITDA (If you have chosen a bank use the Operating Income) Total Debt / EBITDA . Interest Coverage Ratio Gearing Ratio Question 5 (2 marks ): Compute the yield to maturity, coupon, credit spread, and time to maturity of your portfolio. Compare these statistics to a hypothetical portfolio that is equally weighted. Which statistics change the most? Does this make you question your decision in Question 18 Question 6 (1 marks ): Given all your securities are denominated in AUD, it is useful to determine what the spread of each security would be in a foreign currency. For each of thefired rate bonds only, report the Smap Spread in USD, BUR, and JPY using the cross-currency lab in the bond calculator (BNDC). Question 7 (2 marks ): Compute the duration and spread duration of the portfolio. For the fixed rate bonds use the modified duration and for the floating rate notes use the spread duration. These measures should be reported on the valu- ations page. Once this has been done, conduct a sensitivity analysis on the portfolio and show in a line chart what would happen on the value of the portfolio if the credit spread changed by 25bps, 35bpa, 45bpa, 50bpa, 8 55bpa. Show the effect the change both in terms of an increase and a decrease in the spread. Assume there is no converily. Question 8 (2 marks ): Report the credit rating of each security and the default probability as given on Eikon. If the security is not rated, use the credit rating of the issuer. If you still cannot find a credit rating, assume the security is rated 'BB'. You can find the credit ratings on the description page. To find the default probabilities you can search in the following manner: For instance, for a 'BBB' rated security type: 'BBBAUDDSY= Q' (Leave a space between = and 2). Assume each security is a 5 year security for simplicity and that there is no differentiation between notching (BBB + and BBB- are the same). For 'BB' or non-rated securities use 'BBUSDDSY= Q'. Finally, compute the credit rating and default probability of the overall portfolio. What sort of credit rating does the portfolio resemble the most