Today is the 14th September 2001 (the last day of Quarter 2) and, as the manager of a large portfolio of liabilities, you need to determine the funds to be raised or invested on the first day of Quarter 3 (tomorrow).

Other information that may be relevant to this calculation includes:

Two of your clients (QEPA, APA) will each make a one-off repayment of $12m tomorrow.

Another client (LG) requires an advance of $17m tomorrow and this follows an advance of the same amount on the 15th June (at 7.20% for three years).

Tomorrow, LG will also pay an overseas supplier US$5M (AUD11M) for the supply of raw materials for a new infrastructure project.

At the start of the year (15th March) your clients made the following debt service payments: o QEPA: $1.32m o LG: $2.72m o APA: $5.89m Note: these quarterly debt service payments are scheduled to continue for at least the next two years.

No futures contracts were bought or sold in June. However, you plan to buy 150 ten year futures contracts tomorrow. The deposit margin is $2,100 per contract and brokerage is $6 per contract payable in arrears.

At the start of the current quarter, you issued commercial paper with face value of $170m. The face value and coupon of bonds currently on issue is: DB02 ($160m/6.11%); DB03 ($120m/6.24%); DB07 ($290m/6.76%); DB11 ($400m/6.88%). There are two pay fixed, receive floating domestic interest rate swaps on issue with face value and coupon: IRSDB04 ($43m/5.1%); IRSDB11 ($102m/5.65%). Also, on issue is one $US denominated eurobond (US11) with face value and coupon of $US62m/6.5% and one $Euro denominated eurobond (EUR06) with face value and coupon of $EUR54.23m/6%. Both eurobonds have been swapped back into domestic CP3M with a face value of AUD200m.

Coupons are paid in March and September

The market value of the portfolio on the 15th June was $1,107,534,373 and the administration charge is 0.50% per annum.

Assume that there are no debt service payments other than those mentioned or implied above.

(a) Calculate the net client cashflow that will occur on the first day of the new quarter (tomorrow). Clearly show all calculations and cashflows. (5 Marks)

(b) You are required to calculate the portfolio generated cashflows. Note: The mid 3-month rate from last quarter (for the floating side of swaps) was 5.41% and there were 92 days in the quarter just completed. (4 Marks)

(c) Calculate the net funding or investment requirement, including any impact from futures contracts. Clearly indicate whether the calculated amount requires funding or investment. (1 Mark)