Use the below set of four on-the-run Australian Commonwealth Government Securities. Collect the key characteristics of each of the bonds (coupon rate, maturity date) and bond yield data as at the end of December 2016 (last working day of the month) and the end of June 2017 (last working day of the month).

1.Calculate the dirty price, clean price, modified duration and modified convexity of the Government bonds as at the end of December 2016 and the end of June 2017. Discuss your results.

2.Calculate the holding period return for each of the bonds over the period from December 2016 to the end of June 2017. Discuss your results.

3.Calculate the modified duration, modified convexity for an equally-weighted portfolio of the bonds at both dates and estimate the holding period return for the portfolio over the 6-month period between the two dates. Report on your findings. Compare and contrast the return and volatility of the portfolio to the separate bonds at both dates. Discuss your results.

Treasury Bond 132

5.50%

21-Jan-2018

Frequency: Daily

Type: Original

Units: Per cent per annum

Source: Yieldbroker

Publication date: 22-Sep-2017

Series ID: FCMYJAN18D

30-Dec-2016: 1.735

30-Jun-2017: 1.610

Treasury Bond 141

3.25%

21-Oct-2018

Frequency: Daily

Type: Original

Units: Per cent per annum

Source: Yieldbroker

Publication date: 22-Sep-2017

Series ID: FCMYOCT18D

30-Dec-2016: 1.820

30-Jun-2017: 1.640

Treasury Bond 122

5.25%

15-Mar-2019

Frequency: Daily

Type: Original

Units: Per cent per annum

Source: Yieldbroker

Publication date: 22-Sep-2017

Series ID: FCMYMAR19D

30-Dec-2016: 1.905

30-Jun-2017: 1.725

Treasury Bond 143

2.75%

21-Oct-2019

Frequency: Daily

Type: Original

Units: Per cent per annum

Source: Yieldbroker

Publication date: 22-Sep-2017

Series ID: FCMYOCT19D

30-Dec-2016: 1.955

30-Jun-2017: 1.825