Use Exhibit 9.4 to answer the following questions.

a. How is the yield for the Junc 2000 Eurodollar interest rate future calculated:

b. A financial manager wishing to hedge the interest the firm would receive on a \(\$ 12.5\) million principal in September 2000 would take what type of a position?

c. A financial manager with a floating rate loan whose interest payment is due in December 1999 would enter into what type of a position? Explain how it would hedge the firm's interest rate exposure.

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Exhibit 9.4 Eurodollar Futures Prices Open Maturity Open High Low Settle Yield Interest June 94.99 95.01 94.98 95.01 4.99 455,763 Sept 94.87 94.97 94.87 94.96 5.04 535,932 Dec 94.60 94.70 94.60 94.68 5.32 367,036 Mar DO 94.67 94.77 94.66 94.76 5.24 299,993 June 94.55 94.68 94.54 94.63 5.37 208,949 Sept 94.43 94.54 94.43 94.53 5.47 168,961 Dec 94.27 94.38 94.27 94.36 5.64 130,824 Abstracted from The Wall Street Journal, Friday April 30, 1999, p. C16. Only regular quarterly maturities are shown. All contracts are for $1 million; points of 100%. Open interest refers to number of contracts outstanding.