Suppose you work as a junior analyst in one large Australian mining firm, which mainly export coal to Japan. The company has 100 million dollars to invest for up to 10 years in a financial instrument. Your boss, who knows a lot about finance, ask you to investigate the possibility to invest the full amount in one or more 10 year-bonds (for one or different countries) to diversify the risk of being totally exposed to the Japanese economy. Your task is to write a report about 10 years government bonds (you can choice one or more of the countries/bonds in the data folder) and provide a recommendation for the company to invest (for example 30% in bond of country X and 20% on bonds of country Y, etc). Other investments such as share will not be considered for the company. This is a great opportunity to test your understanding of this financial instrument and understand what factors you should consider for this investment. For this assignment marks will be allocated in the following manner:

Ques: Use the data in the file: 10 year bond.xls to construct a table of the correlation amongst each pair of all 10-year bond yield, described your results and investigates why some countries yield are very high correlated.

	US 10 year bond yields	Germany 10 year bond yields	Japan 10 year bond yields	UK 10 year bond yields	Italy 10 year bond yields	Spain 10 year bond yields	France 10 year bond yields	New Zealand10 year bond yields	Australia 10 year bond yields
US 10 year bond yields	1.00
Germany 10 year bond yields	0.92	1.00
Japan 10 year bond yields	0.78	0.71	1.00
UK 10 year bond yields	0.93	0.96	0.76	1.00
Italy 10 year bond yields	0.04	0.14	-0.01	-0.06	1.00
Spain 10 year bond yields	-0.07	-0.01	-0.16	-0.20	0.90	1.00
France 10 year bond yields	0.87	0.98	0.68	0.90	0.33	0.16	1.00
New Zealand10 year bond yields	0.90	0.94	0.70	0.96	-0.02	-0.15	0.89	1.00
Australia 10 year bond yields	0.87	0.90	0.75	0.93	-0.03	-0.15	0.85	0.97	1.00

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