You have a client who wishes to purchase a 7-year Guaranteed Investment Contract at 1.30%. compounded semi-annually. Assume you are an asset manager who doesn?t like risk and will cover with Treasury Bonds Show how using Duration and Convexity you can construct a portfolio that will optimize the management of your assets.

Maturity Coupon Bid Asked Chg Asked yield 10/31/2016 0.375 100.0078 100.0234 0.0313 -0.241 10/31/2016 1.000 100.0234 100.0391 0.0000 -0.027 10/31/2016 3.125 100.1016 100.1172 -0.0234 0.044 11/15/2016 0.625 100.0313 100.0469 0.0078 0.030 11/15/2016 4.625 100.3359 100.3516 -0.0313 0.160 11/15/2016 7.500 100.5313 100.5469 -0.0391 0.541 11/30/2016 0.500 100.0313 100.0469 unch. 0.110 11/30/2016 0.875 100.0625 100.0781 -0.0078 0.224 11/30/2016 2.750 100.2969 100.3125 -0.0078 0.149 12/15/2016 0.625 100.0469 100.0625 -0.0078 0.237 12/31/2016 0.625 100.0547 100.0703 -0.0078 0.279 12/31/2016 0.875 100.0938 100.1094 -0.0156 0.337 12/31/2016 3.250 100.5781 100.5938 -0.0234 0.332 1/15/2017 0.750 100.0938 100.1094 -0.0078 0.302 1/31/2017 0.500 100.0234 100.0391 unch. 0.364 1/31/2017 0.875 100.1328 100.1484 -0.0078 0.359 1/31/2017 3.125 100.7813 100.7969 -0.0156 0.354 2/15/2017 0.625 100.0703 100.0859 0.0078 0.363 2/15/2017 4.625 101.3750 101.3906 -0.0234 0.387 2/28/2017 0.500 100.0313 100.0469 0.0078 0.373 2/28/2017 0.875 100.1641 100.1797 unch. 0.389 2/28/2017 3.000 100.9375 100.9531 -0.0313 0.420 3/15/2017 0.750 100.1250 100.1406 0.0078 0.408 3/31/2017 0.500 100.0156 100.0313 0.0078 0.431 3/31/2017 1.000 100.2422 100.2578 0.0156 0.430 3/31/2017 3.250 101.2500 101.2656 -0.0078 0.452 4/15/2017 0.875 100.1953 100.2109 0.0234 0.448 4/30/2017 0.500 100.0000 100.0156 0.0234 0.471 4/30/2017 0.875 100.1797 100.1953 unch. 0.511 4/30/2017 3.125 101.3750 101.3906 -0.0078 0.533 5/15/2017 0.875 100.1797 100.1953 unch. 0.536 5/15/2017 4.500 102.2578 102.2734 -0.0313 0.560 5/15/2017 8.750 104.6641 104.6797 -0.0781 0.636 5/31/2017 0.625 100.0313 100.0469 unch. 0.549 5/31/2017 2.750 101.3359 101.3516 -0.0234 0.563 6/15/2017 0.875 100.1797 100.1953 -0.0156 0.578 6/30/2017 0.625 100.0156 100.0313 -0.0078 0.580 6/30/2017 0.750 100.1094 100.1250 0.0234 0.572 6/30/2017 2.500 101.3047 101.3203 -0.0391 0.616 7/15/2017 0.875 100.1719 100.1875 -0.0234 0.622 7/31/2017 0.500 99.8984 99.9141 -0.0234 0.609 7/31/2017 0.625 100.0078 100.0234 0.0078 0.595 7/31/2017 2.375 101.3594 101.3750 -0.0156 0.623 8/15/2017 4.750 103.3594 103.3750 -0.0391 0.659 8/15/2017 8.875 106.7031 106.7188 -0.0625 0.727 8/31/2017 0.625 99.9766 99.9922 0.0234 0.634 8/31/2017 1.875 101.0313 101.0469 -0.0156 0.666 9/15/2017 1.000 100.2734 100.2891 unch. 0.681 9/30/2017 0.625 99.9297 99.9453 0.0078 0.683 9/30/2017 1.875 101.1094 101.1250 unch. 0.689 10/15/2017 0.875 100.1406 100.1563 unch. 0.717 10/31/2017 0.750 100.0078 100.0234 -0.0156 0.727 10/31/2017 1.875 101.1641 101.1797 -0.0313 0.732 11/15/2017 0.875 100.1250 100.1406 0.0078 0.744 11/15/2017 4.250 103.7422 103.7578 -0.0234 0.746 11/30/2017 0.625 99.8594 99.8750 0.0234 0.737 11/30/2017 0.875 100.1328 100.1484 0.0156 0.742 11/30/2017 2.250 101.6484 101.6641 -0.0234 0.755 12/15/2017 1.000 100.2734 100.2891 unch. 0.749 12/31/2017 0.750 99.9531 99.9688 -0.0313 0.776 12/31/2017 1.000 100.2500 100.2656 -0.0078 0.778 12/31/2017 2.750 102.3281 102.3438 -0.0313 0.789 1/15/2018 0.875 100.1016 100.1172 unch. 0.780 1/31/2018 0.750 99.9531 99.9688 0.0156 0.774 1/31/2018 0.875 100.0938 100.1094 -0.0078 0.789 1/31/2018 2.625 102.3281 102.3438 -0.0078 0.792 2/15/2018 1.000 100.2500 100.2656 -0.0078 0.799 2/15/2018 3.500 103.5234 103.5391 -0.0156 0.816 2/28/2018 0.750 99.9219 99.9375 unch. 0.796 2/28/2018 2.750 102.6406 102.6563 -0.0313 0.797 3/15/2018 1.000 100.2813 100.2969 0.0078 0.788 3/31/2018 0.750 99.9141 99.9297 -0.0078 0.799 3/31/2018 0.875 100.0703 100.0859 -0.0156 0.815 3/31/2018 2.875 102.9297 102.9453 -0.0469 0.832 4/15/2018 0.750 99.8906 99.9063 -0.0078 0.813 4/30/2018 0.625 99.6797 99.6953 -0.0156 0.825 4/30/2018 0.750 99.8438 99.8594 -0.0313 0.842 4/30/2018 2.625 102.7500 102.7656 -0.0156 0.812 5/15/2018 1.000 100.2656 100.2813 0.0078 0.820 5/15/2018 3.875 104.8594 104.8750 -0.0234 0.762 5/15/2018 9.125 113.0391 113.0547 -0.0625 0.788 5/31/2018 0.875 100.0547 100.0703 -0.0078 0.831 5/31/2018 1.000 100.2578 100.2734 -0.0078 0.830 5/31/2018 2.375 102.4688 102.4844 -0.0078 0.828 6/15/2018 1.125 100.4531 100.4688 -0.0078 0.840 6/30/2018 0.625 99.6406 99.6563 unch. 0.829 6/30/2018 1.375 100.8984 100.9141 unch. 0.833 6/30/2018 2.375 102.5859 102.6016 0.0078 0.834 7/15/2018 0.875 100.0625 100.0781 0.0078 0.830 7/31/2018 0.750 99.8125 99.8281 unch. 0.847 7/31/2018 1.375 100.9219 100.9375 unch. 0.845 7/31/2018 2.250 102.4844 102.5000 -0.0078 0.838 8/15/2018 1.000 100.2734 100.2891 unch. 0.840 8/15/2018 4.000 105.7969 105.8125 -0.0313 0.792 8/31/2018 0.750 99.7891 99.8047 -0.0078 0.855 8/31/2018 1.500 101.1563 101.1719 -0.0234 0.867 9/15/2018 1.000 100.2422 100.2578 unch. 0.864 9/30/2018 0.750 99.8359 99.8516 unch. 0.827 9/30/2018 1.375 100.9609 100.9766 0.0078 0.870 10/15/2018 0.875 99.9922 100.0078 0.0156 0.871 10/31/2018 1.250 100.7109 100.7266 0.0156 0.889 10/31/2018 1.750 101.7109 101.7266 unch. 0.893 11/15/2018 1.250 100.7109 100.7266 0.0156 0.896 11/15/2018 3.750 105.8672 105.8828 -0.0547 0.887 11/15/2018 9.000 116.8359 116.8516 -0.1094 0.808 11/30/2018 1.250 100.7188 100.7344 0.0156 0.899 11/30/2018 1.375 100.9453 100.9609 -0.0234 0.916 12/15/2018 1.250 100.7031 100.7188 0.0078 0.913 12/31/2018 1.375 100.9531 100.9688 -0.0234 0.930 12/31/2018 1.500 101.2422 101.2578 0.0078 0.922 1/15/2019 1.125 100.4297 100.4453 -0.0078 0.924 1/31/2019 1.250 100.7031 100.7188 -0.0156 0.932 1/31/2019 1.500 101.2422 101.2578 -0.0313 0.943 2/15/2019 0.750 99.5625 99.5781 -0.0234 0.934 2/15/2019 2.750 104.2031 104.2188 -0.0156 0.915 2/15/2019 8.875 118.4766 118.4922 -0.1016 0.839 2/28/2019 1.375 100.9766 100.9922 -0.0234 0.951 2/28/2019 1.500 101.2578 101.2734 -0.0234 0.955 3/15/2019 1.000 100.1172 100.1328 -0.0078 0.944 3/31/2019 1.500 101.3203 101.3359 -0.0078 0.948 3/31/2019 1.625 101.6016 101.6172 unch. 0.956 4/15/2019 0.875 99.7813 99.7969 0.0078 0.958 4/30/2019 1.250 100.7344 100.7500 -0.0078 0.950 4/30/2019 1.625 101.6719 101.6875 0.0078 0.950 5/15/2019 0.875 99.7656 99.7813 -0.0078 0.961 5/15/2019 3.125 105.5078 105.5234 -0.0313 0.952 5/31/2019 1.125 100.4219 100.4375 -0.0156 0.955 5/31/2019 1.500 101.3516 101.3672 -0.0234 0.970 6/15/2019 0.875 99.7266 99.7422 -0.0156 0.973 6/30/2019 1.000 100.0625 100.0781 -0.0156 0.971 6/30/2019 1.625 101.6953 101.7109 -0.0234 0.982 7/15/2019 0.750 99.3594 99.3750 -0.0313 0.981 7/31/2019 0.875 99.6797 99.6953 -0.0156 0.986 7/31/2019 1.625 101.7188 101.7344 -0.0078 0.993 8/15/2019 0.750 99.3125 99.3281 -0.0313 0.991 8/15/2019 3.625 107.3125 107.3281 -0.0547 0.991 8/15/2019 8.125 119.8359 119.8516 -0.1016 0.990 8/31/2019 1.000 99.9766 99.9922 -0.0313 1.003 8/31/2019 1.625 101.7188 101.7344 -0.0469 1.010 9/15/2019 0.875 99.6094 99.6250 -0.0469 1.006 9/30/2019 1.000 99.9688 99.9844 -0.0078 1.005 9/30/2019 1.750 102.1328 102.1484 -0.0156 1.010 10/15/2019 1.000 99.9844 100.0000 -0.0469 1.000 10/31/2019 1.250 100.6641 100.6797 -0.0469 1.022 10/31/2019 1.500 101.4063 101.4219 -0.0391 1.023 11/15/2019 3.375 107.0703 107.0859 -0.0234 1.031 11/30/2019 1.000 99.8672 99.8828 -0.0234 1.038 11/30/2019 1.500 101.3984 101.4141 -0.0469 1.038 12/31/2019 1.125 100.2266 100.2422 -0.0234 1.048 12/31/2019 1.625 101.7578 101.7734 -0.0625 1.060 1/31/2020 1.250 100.5469 100.5625 -0.0469 1.075 1/31/2020 1.375 100.9453 100.9609 -0.0703 1.077 2/15/2020 3.625 108.3047 108.3203 -0.0547 1.074 2/15/2020 8.500 124.3203 124.3359 -0.1250 1.042 2/29/2020 1.250 100.5234 100.5391 -0.0469 1.087 2/29/2020 1.375 100.9219 100.9375 -0.0547 1.091 3/31/2020 1.125 100.0547 100.0703 -0.0781 1.104 3/31/2020 1.375 100.9063 100.9219 -0.0781 1.102 4/30/2020 1.125 99.9844 100.0000 -0.0703 1.125 4/30/2020 1.375 100.8438 100.8594 -0.0781 1.127 5/15/2020 3.500 108.2109 108.2266 -0.0938 1.147 5/15/2020 8.750 126.6719 126.6875 -0.1250 1.121 5/31/2020 1.375 100.7813 100.7969 -0.0938 1.150 5/31/2020 1.500 101.2266 101.2422 -0.0781 1.149 6/30/2020 1.625 101.6719 101.6875 -0.0781 1.158 6/30/2020 1.875 102.5625 102.5781 -0.0703 1.162 7/31/2020 1.625 101.6641 101.6797 -0.0859 1.170 7/31/2020 2.000 103.0313 103.0469 -0.0781 1.175 8/15/2020 2.625 105.3594 105.3750 -0.0859 1.185 8/15/2020 8.750 128.4688 128.4844 -0.1328 1.127 8/31/2020 1.375 100.7109 100.7266 -0.0625 1.182 8/31/2020 2.125 103.5234 103.5391 -0.0859 1.187 9/30/2020 1.375 100.6641 100.6797 -0.0703 1.198 9/30/2020 2.000 103.0703 103.0859 -0.0938 1.198 10/31/2020 1.375 100.6250 100.6406 -0.0859 1.212 10/31/2020 1.750 102.0781 102.0938 -0.1172 1.217 11/15/2020 2.625 105.5703 105.5859 -0.1094 1.217 11/30/2020 1.625 101.5938 101.6094 -0.0938 1.223 11/30/2020 2.000 103.0859 103.1016 -0.1172 1.226 12/31/2020 1.750 102.0938 102.1094 -0.1172 1.233 12/31/2020 2.375 104.6328 104.6484 -0.1016 1.237 1/31/2021 1.375 100.5078 100.5234 -0.0938 1.249 1/31/2021 2.125 103.6094 103.6250 -0.1016 1.254 2/15/2021 3.625 109.9766 109.9922 -0.0938 1.246 2/15/2021 7.875 127.9531 127.9688 -0.1328 1.221 2/28/2021 1.125 99.4844 99.5000 -0.0703 1.243 2/28/2021 2.000 103.1172 103.1328 -0.0859 1.261 3/31/2021 1.250 99.9219 99.9375 -0.0859 1.264 3/31/2021 2.250 104.2031 104.2188 -0.0938 1.273 4/30/2021 1.375 100.4219 100.4375 -0.0703 1.275 4/30/2021 2.250 104.2813 104.2969 -0.0859 1.273 5/15/2021 3.125 108.1250 108.1406 -0.1094 1.288 5/15/2021 8.125 130.4766 130.4922 -0.1875 1.252 5/31/2021 1.375 100.4453 100.4609 -0.1094 1.272 5/31/2021 2.000 103.1563 103.1719 -0.0938 1.291 6/30/2021 1.125 99.2500 99.2656 -0.0859 1.286 6/30/2021 2.125 103.7422 103.7578 -0.1094 1.299 7/31/2021 1.125 99.1953 99.2109 -0.1016 1.295 7/31/2021 2.250 104.3359 104.3516 -0.1172 1.309 8/15/2021 2.125 103.7344 103.7500 -0.1094 1.321 8/15/2021 8.125 131.8750 131.8906 -0.1875 1.291 8/31/2021 1.125 99.2188 99.2344 -0.0859 1.288 8/31/2021 2.000 103.1563 103.1719 -0.1328 1.325 9/30/2021 1.125 99.2422 99.2578 -0.1328 1.280 9/30/2021 2.125 103.7734 103.7891 -0.1250 1.332 10/31/2021 2.000 103.1484 103.1641 -0.1563 1.348 11/15/2021 2.000 103.1563 103.1719 -0.1719 1.352 11/15/2021 8.000 132.6953 132.7109 -0.2422 1.320 11/30/2021 1.875 102.5156 102.5313 -0.2031 1.361 12/31/2021 2.125 103.7734 103.7891 -0.1641 1.368 1/31/2022 1.500 100.5625 100.5781 -0.1797 1.386 2/15/2022 2.000 103.1328 103.1484 -0.1953 1.385 2/28/2022 1.750 101.7891 101.8047 -0.1875 1.400 3/31/2022 1.750 101.7578 101.7734 -0.2031 1.411 4/30/2022 1.750 101.7188 101.7344 -0.2188 1.423 5/15/2022 1.750 101.6563 101.6719 -0.2266 1.437 5/31/2022 1.875 102.3672 102.3828 -0.2031 1.432 6/30/2022 2.125 103.6875 103.7031 -0.2031 1.446 7/31/2022 2.000 102.9844 103.0000 -0.2109 1.458 8/15/2022 1.625 100.9375 100.9531 -0.2109 1.454 8/15/2022 7.250 132.6328 132.6484 -0.3047 1.398 8/31/2022 1.875 102.2422 102.2578 -0.2266 1.472 9/30/2022 1.750 101.4922 101.5078 -0.2500 1.484 10/31/2022 1.875 102.2031 102.2188 -0.2266 1.489 11/15/2022 1.625 100.7500 100.7656 -0.2344 1.493 11/15/2022 7.625 135.9375 135.9531 -0.3203 1.429 11/30/2022 2.000 102.8984 102.9141 -0.2422 1.500 12/31/2022 2.125 103.6094 103.6250 -0.2578 1.511 1/31/2023 1.750 101.3594 101.3750 -0.2578 1.520 2/15/2023 2.000 102.8984 102.9141 -0.2578 1.515 2/15/2023 7.125 134.1328 134.1484 -0.3125 1.457 2/28/2023 1.500 99.7656 99.7813 -0.2891 1.536 3/31/2023 1.500 99.7422 99.7578 -0.2500 1.540 4/30/2023 1.625 100.4375 100.4531 -0.3047 1.552 5/15/2023 1.750 101.2578 101.2734 -0.2500 1.546 5/31/2023 1.625 100.4063 100.4219 -0.2656 1.558 6/30/2023 1.375 98.8125 98.8281 -0.2734 1.560 7/31/2023 1.250 97.9375 97.9531 -0.2734 1.569 8/15/2023 2.500 106.0547 106.0703 -0.2734 1.559 8/15/2023 6.250 130.5156 130.5313 -0.3594 1.525 8/31/2023 1.375 98.6797 98.6953 -0.2656 1.576 9/30/2023 1.375 98.6016 98.6172 -0.2578 1.586 11/15/2023 2.750 107.7734 107.7891 -0.3203 1.582 2/15/2024 2.750 107.8672 107.8828 -0.3203 1.605 5/15/2024 2.500 106.1875 106.2031 -0.3438 1.627 8/15/2024 2.375 105.2266 105.2422 -0.3594 1.658 11/15/2024 2.250 104.2422 104.2578 -0.3516 1.684 11/15/2024 7.500 144.6719 144.6875 -0.4453 1.585 2/15/2025 2.000 102.1484 102.1641 -0.4219 1.720 2/15/2025 7.625 146.6250 146.6406 -0.4766 1.617 5/15/2025 2.125 103.0938 103.1094 -0.4063 1.733 8/15/2025 2.000 101.9922 102.0078 -0.4453 1.753 8/15/2025 6.875 142.6016 142.6172 -0.5625 1.664 11/15/2025 2.250 104.0000 104.0156 -0.4531 1.769 2/15/2026 1.625 98.6719 98.6875 -0.4688 1.778 2/15/2026 6.000 136.5547 136.5703 -0.5547 1.737 5/15/2026 1.625 98.5625 98.5781 -0.4766 1.787 8/15/2026 1.500 97.3750 97.3906 -0.4688 1.791 8/15/2026 6.750 144.9297 144.9453 -0.6797 1.752 11/15/2026 6.500 143.3984 143.4141 -0.6719 1.776 2/15/2027 6.625 145.5000 145.5156 -0.6719 1.781 8/15/2027 6.375 144.4453 144.5078 -0.7266 1.826 11/15/2027 6.125 142.6641 142.7266 -0.7422 1.843 8/15/2028 5.500 137.9375 138.0000 -0.7891 1.898 11/15/2028 5.250 135.8438 135.9063 -0.7734 1.908 2/15/2029 5.250 136.3516 136.4141 -0.7969 1.919 8/15/2029 6.125 147.5000 147.5625 -0.8984 1.923 5/15/2030 6.250 151.1875 151.2500 -0.9844 1.939 2/15/2031 5.375 142.6953 142.7578 -1.0078 1.942 2/15/2036 4.500 136.5313 136.5938 -1.4375 2.172 2/15/2037 4.750 140.6875 140.7500 -1.5625 2.243 5/15/2037 5.000 145.2109 145.2734 -1.6406 2.242 2/15/2038 4.375 135.0313 135.0938 -1.5859 2.287 5/15/2038 4.500 137.3359 137.3984 -1.6406 2.293 2/15/2039 3.500 119.4766 119.5391 -1.5547 2.368 5/15/2039 4.250 132.3828 132.4453 -1.6641 2.383 8/15/2039 4.500 136.8828 136.9453 -1.7031 2.391 11/15/2039 4.375 134.6484 134.7109 -1.7344 2.406 2/15/2040 4.625 139.2891 139.3516 -1.7656 2.410 5/15/2040 4.375 134.8516 134.9141 -1.7422 2.423 8/15/2040 3.875 125.6797 125.7422 -1.6953 2.443 11/15/2040 4.250 132.7188 132.7500 -1.7969 2.443 2/15/2041 4.750 142.2734 142.3047 -1.9063 2.435 5/15/2041 4.375 135.3516 135.3828 -1.8203 2.450 8/15/2041 3.750 123.7266 123.7578 -1.6641 2.465 11/15/2041 3.125 111.8281 111.8594 -1.6250 2.487 2/15/2042 3.125 111.8516 111.8828 -1.6328 2.490 5/15/2042 3.000 109.4141 109.4453 -1.6250 2.498 8/15/2042 2.750 104.4844 104.5156 -1.6094 2.511 11/15/2042 2.750 104.3359 104.3672 -1.6328 2.520 2/15/2043 3.125 111.7969 111.8281 -1.6719 2.508 5/15/2043 2.875 106.7188 106.7500 -1.6484 2.525 8/15/2043 3.625 122.2266 122.2578 -1.8047 2.483 11/15/2043 3.750 124.9844 125.0156 -1.8047 2.477 2/15/2044 3.625 122.2031 122.2344 -1.8516 2.497 5/15/2044 3.375 117.0234 117.0547 -1.7813 2.514 8/15/2044 3.125 111.8594 111.8906 -1.7500 2.527 11/15/2044 3.000 109.2188 109.2500 -1.7422 2.537 2/15/2045 2.500 98.8828 98.9141 -1.6406 2.554 5/15/2045 3.000 109.2188 109.2500 -1.7500 2.543 8/15/2045 2.875 106.6094 106.6406 -1.7813 2.548 11/15/2045 3.000 109.1875 109.2188 -1.8047 2.549 2/15/2046 2.500 98.7578 98.7891 -1.6953 2.559 5/15/2046 2.500 98.8359 98.8672 -1.7031 2.555 8/15/2046 2.250 93.6250 93.6563 -1.6328 2.555