Sunshine Funds Ltd is a public listed company. Its main activity is investment in fixed interest securities. The company provides an alternative to superannuation plans. Its main asset consists of a portfolio of Australian Government Treasury bonds. Investors purchase shares in the company and even though the company does not pay dividends, investors can expect to obtain a substantial capital gain on their shares. Through a promotional campaign, Sunshine Funds has attracted a large number of private investors aged in the mid 40's to late 50's. It is expected that these investors will sell their shares upon individual retirement. The current portfolio of Sunshine Funds Ltd, assume it is now the 15th of July 2018, consist of the following Commonwealth Treasury Bonds: (Note: these bonds have been used for the purpose of the exercise; that is, they are hypothetical bonds). Sunshine's portfolio was constructed according to company policy. This policy is confidential, but the composition of the portfolio itself is publicly available. The policy currently is: i. The portfolio must have a duration that is within a specified narrow range set by the Board of Directors. ii. The minimum spread of the portfolio must be across the bond series with no one series representing less than 5.0 percent of the portfolio's market value. Recently, Sunshine directors have reviewed and intended to alter its policy in two ways. Firstly, it will increase the portfolio duration by one (1) year. Secondly, it will increase the market value of the portfolio by approximately $3.0 million after transaction costs. In rebalancing its portfolio, Sunshine Funds Ltd will seek to avoid unnecessary transaction costs. Additional Information: i Ignore tax implications ii. The interest rate structure is currently flat at an annual rate of 7.90%. iii. The company's semi-annual coupons are paid on the 15th day of each respective month Required: 1. Construct and show details of Sunshine Ltd.'s new portfolio assuming that it implements its new investment policy in relation to its existing portfolio plus the additional \$ 3.0 million investment. 2. Suppose that interest rates fell by 0.5% across the term structure immediately after new investment policy implemented, calculate the % change in value of the new portfolio