13. An FI issued $1 million of 1-year maturity floating rate commercial paper. The commercial paper is repriced every three months at the 91-day Treasury bill rate plus 2 percent. What is the FI's interest rate risk exposure and how can it use financial futures and options to hedge that rislk exposure? A) The FI can hedge its exposure to interest rate increases by selling financial futures and or buying put options. B) The FI can hedge its exposure to interest rate decreases by selling financial futures and/or buying put options. C) The FI can hedge its exposure to interest rate increases by buying financial futures and/or buying put options. D) The FI can hedge its exposure to interest rate decreases by selling financial futures and'or selling put options E) The FI can hedge its exposure to interest rate decreases by buying financial futures and/or selling put options. 14. In June, an investor finds out that in September she will receive $10 million to invest in three month maturity securities. In June, the 91-day Treasury bill rate is 5.50 percent. What is the investor's profit (loss) if the 91-day rate falls to 5.20 percent in September? A) The investor loses $30,000 because of the 30 basis point decline in interest rates. B) The investor gains $30,000 because of the 30 basis point decline in interest rates. C) The investor gains $7,500 because of the 30 basis point decline in interest rates. D) The investor loses $7,500 because of the 30 basis point decline in interest rates. E) The investor loses $3,000 because of the 30 basis point decline in interest rates. 15. Ifthe investor uses 10 T-bill futures contracts to hedge the interest rate risk in question 14, what can she do? What are the returns on the futures hedge if there is no basis risk? A) She earns $30,000 on the short futures hedge B) She earns $30,000 on the long futures hedge C) She earns $7,500 on the short futures hedge. D) She earns $7,500 on the long futures hedge E) She earns $3,000 on the short futures hedge