HEDGING The Zinn Company plans to issue $$20,000,000$ of $10-$year bonds in March $2021$ to help finance a new research and development laboratory. Assume that interest rate futures maturing in March $2021$ are selling for $125145.$ It is now early June $2020,$ and the current cost of debt to the high$-$risk biotech company is $11\%.$ However, the firm$$s financial manager is concerned that interest rates will climb even higher in the coming months.

A$.$ Create a hedge against rising interest rates.

B$.$ Assume that interest rates generally increase by $200$ basis points. How well did your hedge perform?

C$.$ What is a perfect hedge? Are most real$-$world hedges perfect? Explain.

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