BUSM4160 Report: Evaluating Government Bond Investment Safety

This report evaluates the safety of government bonds, focusing on Australian government securities. It discusses the bonds' characteristics, including their low-risk nature as per ASIC, trading on the ASX, and various types offering different risk-return profiles. The report highlights key points such as predictable cash flow, quarterly interest payments, and tax exemptions, while also addressing potential risks like market value fluctuations and economic influences. It concludes that Australian bonds are a secure investment due to their low risk and reasonable returns, providing insights into factors like interest rate fluctuations and the importance of financial advice, supported by references from ASIC's MoneySmart and other sources.

Running head: ARE GOVERNMENT BOND ARE SAFE INVESTMENT?
ARE GOVERNMENT BOND ARE SAFE INVESTMENT?
Name of the Student
Name of the University
Authors Note

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ARE GOVERNMENT BOND ARE SAFE INVESTMENT?
Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................2
Key points of government bond:.................................................................................................2
Conclusion:......................................................................................................................................4
References:......................................................................................................................................4

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ARE GOVERNMENT BOND ARE SAFE INVESTMENT?
Introduction:
Australian bonds are low risk and highly secured financial instruments as per ASIC. The
objective of the study is to evaluate the how security of the government bonds based on the
information from the credible sources. The overall discussion in the report is to present whether
the government bonds are securing or not.
Discussion:
The government bonds are issuing by the commonwealth of Australia known as
commonwealth government securities that are available for trading in the Australian Security
exchange (ASX). These bonds are act as a benchmark in the market for the other bond issuers.
The buying and selling of exchange-traded Treasury bond and exchange-traded treasury bonds
are trading in the Australian stock exchange like share (Australiangovernmentbonds.gov.au, 2019).
The government issuing the different types of bond based on risk and expected return. It
gives the investor an opportunity to make the investment as per own choice. ASIC’s money
smart website has guide to understand whether the investment is right or not based on the basic
principle of investment (Smales 2013).
Key points of government bond:
The important information about the government bonds regarding risk and benefits has
mentioned below-
 These bonds are highly secured as per ASIC
 There is no fluctuation of interest rate over the period of investment until
maturity that is fixed in exchange traded treasury indexed bond

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ARE GOVERNMENT BOND ARE SAFE INVESTMENT?
 These investment provides investor a predictable cash flow on a periodic
basic heaving a maturity date
 The bonds are traded in the Australian stock exchange which provide the
interest in quarterly basis (shopping et al., 2019)
 There is a low risk associate with these bonds which one investor will get
the face value if hold until maturity
 The investor will get a regular income source for holding the bond
(Jammazi, et al 2015)
 This is easy to buy and sell any time and the exchange trade indexed bond
are not affected by the inflation
 Holding or investing in government bond provide the tax exemption to the
investor on interest earnings
 As there is a low risk associate with the investment so it is very much
suitable or familiar for the retail investor
Risk:
 The Australian bonds are subjected to the market value if it sells before
maturity which depend on the price the people are interested to pay
 Trading of the bond in the Australian stock exchange are influenced by the
economic and interest rate fluctuation (shopping et al., 2019)
 Although the exchange traded treasury indexed bond are not influenced by
the inflation but exchange traded bond are influencing
 It is important to analyse the risk and return so it requires the financial
assistance from the adviser

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ARE GOVERNMENT BOND ARE SAFE INVESTMENT?
Conclusion:
From, the above analysis it can be conclude that the Australian bonds has secured to
invest since the risk associate with it is low including the reasonable return. ASIC provide the
financial assistance for investment. Government bond provide both the option such as fixed and
fluctuation interest rate so that the individual can invest based on their risk bearing capacity.
References:
ASIC's MoneySmart. [online] Moneysmart.gov.au.Available at: https://www.moneysmart.gov.au
[Accessed 2 Apr. 2019].
Australiangovernmentbonds.gov.au. (2019). Home Page | australiangovernmentbonds. [online]
Available at: https://www.australiangovernmentbonds.gov.au/ [Accessed 2 Apr. 2019].
Jammazi, R., Tiwari, A.K., Ferrer, R. and Moya, P., 2015. Time-varying dependence between
stock and government bond returns: International evidence with dynamic copulas. The North
American Journal of Economics and Finance, 33, pp.74-93.
Smales, L.A., 2013. Impact of macroeconomic announcements on interest rate futures: high‐
frequency evidence from Australia. Journal of Financial Research, 36(3), pp.371-388.