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Options are either net payment or net receipt. Thank You! On December 2 , the manager of a tactical asset allocation fund that is currently
Options are either net payment or net receipt. Thank You!
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 5 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 465.33 and three-month LIBOR was 3.30 percent. The notional principal of the swap is set for the life of the agreement at $70 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 manager's perspective - on each future settlement date, assuming the value for the S\&P 500 index (with all dividends reinvested) and LIBOR are as follows: Do not round intermediate calculations. Round your answers to the nearest dollar. Enter your answers as positive values. On March 2 would be $ On June 2 would be $ On September 2 would be $ On December 2 would be $Step by Step Solution
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