Assume it is now September 1, 2021. Your bank plans to issue certificates of deposits (CDs) amounting to US$8 million in December 2021. The CDs will have maturities of 3 months. The interest on the CDs is tied to 3-month LIBOR + 0.5% at the start date. Interest rates are currently fairly low, and the banks Board is concerned that rates will rise dramatically. The corresponding futures rates for the 3-month Eurodollar futures contracts are 4.0% (December 2021), 5.0% (March 2022), and 6.0% (June 2022). Required: A. What is your banks specific cash market risk on September 1, 2021? [2 MARKS] B. Should the bank buy or sell Eurodollar futures contracts to hedge its borrowing costs associated with the CDs? [2 MARKS] C. Explain how the hedge should work. [2 MARKS] D. Which Eurodollar futures contract should the bank use and explain why it is best? [2 MARKS] E. Assume that the company takes the futures position that you recommended above at the rate available on September 1, 2021, and that at the expiry, the final closing futures rate was 5.0%. Calculate the profit or loss on the futures contract, the opportunity gain or loss in the cash market, and the effective cost to the bank on its borrowing. [12 MARKS]