A. Calculate the dirty price, clean price, modified duration, and convexity of the Government bonds at the end of June

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Part 1: (17 Marks)

  1. Calculate the dirty price, clean price, modified duration, and convexity of the Government bonds at the end of June 2022 and December 2022. Discuss your results. (6 marks)
  2. Calculate the holding period return from the end of June 2022 to the end of December 2022 in each bond. Discuss your results. (4 marks)
  3. Calculate the modified duration and convexity for an equally-weighted portfolio of the four bonds at both dates. Estimate the holding period return for the portfolio over the six months between the two dates—report on your findings. Compare and contrast the return and volatility of the portfolio and the separate bonds at both dates. Discuss your results. (7 marks)

Solution

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