Zinn Company plans to issue $10,000,000 of 10-year bonds in June to help finance a new research and development laboratory. The bonds will pay interest semiannually. It is now November, and the current cost of debt to the high-risk biotech company is 9%. However, the firm's financial manager is concerned that interest rates will climb even higher in coming months. The following data are available: 

Futures Prices: Government of Canada Bonds-$100,000; Price in%

Delivery Month..........................................Price

Dec ..................................................................102.16

Mar................................................................... 102.78

June ................................................................. 102.53

a. Use the given data to create a hedge against rising interest rates.

b. Assume that interest rates in general increase by 200 basis points. How well did your hedge perform?

c. What is a perfect hedge? Are most real-world hedges perfect? Explain.