1. Show the results for the following swap strategy.

Portfolio A has $75 million in stock and $35 million in bonds.

Portfolio B has $45 million in stock and $65 million in bonds.

Portfolio manager A makes a swap with portfolio manager B to exchange stock for bonds with a notional principal of $25 million.

Year-end returns are as follows.

Stock return 4% Bond return 6%

A. (15 pts) Show the asset allocation for each portfolio before the swap here; Identify as A or B.

Portfolio A		Portfolio B
Dollars	Weights	Dollars	Weights
Stock $75 Bonds $35	0.68 0.32	$45 $65	0.41 0.59
Total 110	Total=	Total 110	Total 1.0

B. (25 pts) Show the asset allocation for each portfolio after the swap here; Identify as A or B.

Portfolio A		Portfolio B
Dollars	Weights	Dollars	Weights
Stock 50 Bonds 60	.46 .54	Stock 70 Bonds 40	.64 .36
Total 110	1.00	Total 110	Total 1.00

C. (25 pts) Show the year-end results without the swap for portfolio A and B here.

Portfolio A	Portfolio B
Return= 4.64	Return= 5.18

D. (25 pts) Show the year-end results for portfolio A, and B with the swap here.

Portfolio A	Portfolio B
Return=5.09	Return= 4.72

E. (10 pts) Does portfolio manager A gain or lose from this swap and show the dollar amount here. Show the same results for the year-end values for portfolio B.