This is the 1st project assigned to your team. Your team is required to help clients to form and implement the strategy in constructing and managing a portfolio to achieve the specified objectives.

Portfolio Objectives

• Risks to be kept within moderate levels

• Optimize returns consistent with objective 1

Current holdings Face Value (AUD)

Cash 50,000,000 Bank bills 30 days 0 60 days 0 90 days 0 120 days 0 150 days 0 180 days 0 Bonds CGS 2.00% 21.12.2021 0 CGS 5.75% 15.07.2022 0 CGS 5.50% 21.04.2023 0 CGS 4.75% 21.04.2027 0 CGS 3.25% 21.04.2029 0 CGS 4.50% 21.04.2033 0

Market rate/yields

Table 1: Bank bill and Australian Commonwealth Government Bonds (ACGB) bond rate April.06, 2021. Mid-rate = (bid rate + ask rate)/2

Benchmark Rates (%)
Bills	Bid	Ask	Mid
BB30	0.0490	-0.0510	-0.0010
BB60	0.0590	-0.0410	0.0090
BB90	0.0590	-0.0410	0.0090
BB120	0.0490	-0.0410	0.0040
BB150	0.0590	-0.0410	0.0090
BB180	0.0590	-0.0410	0.0100
Bonds			-
ACGB 2.00% 21.12.2021	0.0390	0.0190	0.0290
ACGB 5.75% 15.07.2022	0.0760	0.0410	0.0585
ACGB 5.50% 21.04.2023	0.0870	0.0610	0.0740
ACGB 2.75% 21.04.2024	0.1180	0.0870	0.1025
ACGB 3.25% 21.04.2025	0.4720	0.4560	0.4640
ACGB 4.25% 21.04.2026	0.7170	0.7010	0.7090
ACGB 2.75% 21.11.2027	1.1080	1.0930	1.1005
ACGB 2.25% 15.05.2028	1.2260	1.2110	1.2185
ACGB 3.25% 21.04.2029	1.3990	1.3870	1.3930
AUCG 2.50% 15.05.2030	1.5960	1.5840	1.5900
ACGB 4.5% 21.04.2033	1.8810	1.8590	1.8700

Trading rules

1. You may buy or sell any other of the money market securities or CGS listed that you need to achieve your objectives, but you must NOT issue debt to fund any acquisitions.

2. Short selling is NOT allowed. That is, you cannot sell any vehicle you do not have in your books. If at the end of the session you have an overall short position of more than 1 million AUD face value, you will lose 1 mark.

3. Deal size is limited to a minimum of 1 million and a maximum of 20 million.

4. Trade with central banks: Three sets of quotations from Bank A, Bank B and Bank C are provided.

Questions:

1. Outline the trading strategy that you planned to achieve the objectives. Your answer could include but not limited to the following points:

• Explain the trading strategies in detail

• Demonstrate which interest rate products or currencies you will buy or sell to achieve your trading objective.

• Demonstrate what rate level you will quote or accept?

2. Explain the transactions you made, in this section, you may include the following points:

• How does each transaction contribute to achieving the trading objective?

• How did you decide the actual price for every transaction?

• Can you implement the planned strategy smoothly?

• What are the key learnings in executing your trading strategy?

3. Analyse the profit and loss of your trading.