Assignment 2: Portfolio revisions using swaps contracts

Please write your name here---------------------------------

It is very important that you show your full calculations and organize your answers and include in each table as shown below.

Statement of the Problem

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

Portfolio B has $40 million in stock and $70 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. 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 Bonds
Total