Question
(A) John Jones wants to hedge a floating rate interest payment on a $2 million loan.. The next quarterly interest payment is determined according to
(A) John Jones wants to hedge a floating rate interest payment on a $2 million loan.. The next quarterly interest payment is determined according to a 3-month LIBOR on December 1, 2022. How could he use Eurodollar futures to do it?
(B) If he entered into a futures position at Monday close of 94.915, what would be his cash flow due to marking to market on Tuesday and on Wednesday?
(C) If on December 1, 2022 the 3-month LIBOR tums out to be 5.5% p.a., Eurodollar futures price 94.745 what would be the total cost to John Jones taking into account gains/losses on his hedge, plus the interest payment (disregard time value of money)?
You are given the following quote for Eurodollar futures prices on Wednesday, 10/26/22
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