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Problem 15-12

On December 2, the manager of a tactical asset allocation fund that is currently invested entirely in floating-rate debt securities decides to shift a portion of her portfolio to equities. To effect this change, she has chosen to enter into the receive equity index side of a one-year equity swap based on movements in the S&P 500 Index plus a spread of 15 basis points. The swap is to have quarterly settlement payments, with the floating-rate side of the agreement pegged to three-month LIBOR denominated in U.S. dollars. At the origination of the swap, the value of the S&P 500 Index was 463.39 and three-month LIBOR was 3.70 percent. The notional principal of the swap is set for the life of the agreement at $30 million, which matches the amount of debt holdings in the fund that she would like to convert to equity.

Calculate the net cash receipt or payment from the fund managers perspective on each future settlement date, assuming the value for the S&P 500 index (with all dividends reinvested) and LIBOR are as follows:

Settlement Date	Number of Days		S&P Level	LIBOR Level
December 2 (initial year)			463.39	3.70	%
March 2 (following year)	90		479.13	3.35
June 2	92		470.30	4.20
September 2	92		483.86	4.35
December 2	91		485.98

Do not round intermediate calculations. Round your answers to the nearest dollar. Enter your answers as positive values.

On March 2 -Select-the net receiptthe net paymentItem 1 would be $ .

On June 2 -Select-the net receiptthe net paymentItem 3 would be $ .

On September 2 -Select-the net receiptthe net paymentItem 5 would be $ .

On December 2 -Select-the net receiptthe net paymentItem 7 would be $ .