A corporate treasurer expects to borrow $19m in six months from today for three months and is concerned that interest rates will rise. The treasurer sells three-month SOFR futures to hedge the risk at a price of 98.

The contract size of SOFR futures is $1m, and each tick is worth $25. The three-month interest rate is quoted at 2.5% in six months, and futures are trading at 97.50. The treasurer unwinds the hedge and borrows the money. What is the effective interest rate on the loan?

A. 0.50%

B.2.00%