19-6 HEDGING The Zinn Company plans to issue $20,000,000 of 10 -year bonds in March 2021 to help finance a new research and development laboratory. Assume that interest rate futures maturing in March 2021 are selling for 125-145. It is now early June 2020, and the current cost of debt to the high-risk biotech company is 11%. However, the firm's financial manager is concerned that interest rates will climb even higher in coming months. a. Create a hedge against rising interest rates. Answer: Futures=+$3,580,617;Bond=$2,203,701;Net=+$1,376,916 b. Assume that interest rates generally increase by 200 basis points. How well did your hedge perform? c. What is a perfect hedge? Are most real-world hedges perfect? Explain