On November $03,2022,$ Global Ltd$.$ wants to borrow $2$ million in two months$$ time

for a period of three months. The current interest rate is $5\%,$ and the company

worries about the potential interest rate rise. We have the following data from the

futures market: January futures price $=94\mathrm{.}17$ and April futures price $=93\mathrm{.}45.$

a$)$ Design a strategy using short$-$term interest rate futures to hedge against

the company$$s exposure to the risk of changing the interest rate.

Suppose the size of interest rate futures is $500,000.$

b$)$ Suppose the interest rate rises to $6\mathrm{.}5\%$ in two months$$ time. What is the

gain$/$loss of the company regarding interest rate income in the cash

market? Show your steps.

c$)$ What is the gain$/$loss from the futures market? Show your steps.

d$)$ If Global Ltd decides to close out this short position before the delivery

date, what will happen to the counterparty position? What are the choices

for the counterparty?