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8. A company treasurer is thinking ahead that on August 15, 2022, his company will issue $25 million of commercial paper with a maturity of

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8. A company treasurer is thinking ahead that on August 15, 2022, his company will issue $25 million of commercial paper with a maturity of 90 days. The company issues CP at 3 month LIBOR plus a spread of 76 basis points. If the paper were issued today with 3 month LIBOR equal to 12 bps, the company would realize $24,945,121. In other words, the company would receive $24,945,121 for its paper and have to redeem it at $25,000,000 in 90 days' time. The September 2022 Eurodollar futures price is quoted as 99.75. a. How should the treasurer hedge the company's exposure to increasing LIBOR? b. On August 15, 2022, the September 2022 Eurodollar quote is 99.50 when the treasurer closes it. What was the gain or loss on the hedge, and how well does this "offset" the change in CP proceeds due to the change in LIBOR? Note: This offset is not ideal because the g/l occurs at the end of the 90 days, not on the CP issue date of 8/15/2022 Till Tabla 71 Tt on invest for four 8. A company treasurer is thinking ahead that on August 15, 2022, his company will issue $25 million of commercial paper with a maturity of 90 days. The company issues CP at 3 month LIBOR plus a spread of 76 basis points. If the paper were issued today with 3 month LIBOR equal to 12 bps, the company would realize $24,945,121. In other words, the company would receive $24,945,121 for its paper and have to redeem it at $25,000,000 in 90 days' time. The September 2022 Eurodollar futures price is quoted as 99.75. a. How should the treasurer hedge the company's exposure to increasing LIBOR? b. On August 15, 2022, the September 2022 Eurodollar quote is 99.50 when the treasurer closes it. What was the gain or loss on the hedge, and how well does this "offset" the change in CP proceeds due to the change in LIBOR? Note: This offset is not ideal because the g/l occurs at the end of the 90 days, not on the CP issue date of 8/15/2022 Till Tabla 71 Tt on invest for four

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