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2. A business signed a sales contract that the business will receive $2M 6 months from now. The business has a cash outflow 8

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2. A business signed a sales contract that the business will receive $2M 6 months from now. The business has a cash outflow 8 months from now. The business can invest in short- term investment with a 5.4% APR today. As the equity market faced selling pressure recently, the wealth effect would reduce spending in the recent future. The manager believes the interest rate would reduce in 6 months from now. The current implied interest rate is 5.4% for interest rate future. Assume the implied interest rate becomes 4.9% at the end of 6 months. Should the business take a long or short position in interest rate future? How much is the outcome from hedging the drop of interest rate? (15 points)

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