Problem 2 (15 points) You are given the following quote for Eurodollar futures prices on Wednesday, Feb 26: Month Open H igh Low Last Change Settle Estimated Prior Day Volume Open Interest MAR 20 98.4100 98.4500 98.4025 98.4350 +0225 98.4450 612,334 1,506,322 APR 20 98.4800 98.5400 98.4700 98.5200 0 450 08535040,743 179.157 MAY 20 98.5700 98.6450 98.5600 98 6250 +0500 98.6350 16.297 44282 a) John Jones wants to hedge a floating rate interest payment on a $5 million deposit. The next quarterly interest payment is determined according to a 3-month LIBOR on April 1, 2020. How could he use Eurodollar futures to do it (position, maturity. number of contracts)? (3 points) b) If he entered into the futures position at Monday close of 98.51, what would be his cash flow due to marking to market on Tuesday and on Wednesday? (4 points) c) What is the value of his futures position (i.e. the value of his futures contracts) on Monday? (4 points) d) If on April 1, 2020 the 3-month LIBOR turns out to be 1.4% p.a., Eurodollar futures price 98.63 what would be the total cost to John Jones taking into account gains/losses on his hedge, plus the interest on the deposit (disregard time value of money)? (4 points) Problem 2 (15 points) You are given the following quote for Eurodollar futures prices on Wednesday, Feb 26: Month Open H igh Low Last Change Settle Estimated Prior Day Volume Open Interest MAR 20 98.4100 98.4500 98.4025 98.4350 +0225 98.4450 612,334 1,506,322 APR 20 98.4800 98.5400 98.4700 98.5200 0 450 08535040,743 179.157 MAY 20 98.5700 98.6450 98.5600 98 6250 +0500 98.6350 16.297 44282 a) John Jones wants to hedge a floating rate interest payment on a $5 million deposit. The next quarterly interest payment is determined according to a 3-month LIBOR on April 1, 2020. How could he use Eurodollar futures to do it (position, maturity. number of contracts)? (3 points) b) If he entered into the futures position at Monday close of 98.51, what would be his cash flow due to marking to market on Tuesday and on Wednesday? (4 points) c) What is the value of his futures position (i.e. the value of his futures contracts) on Monday? (4 points) d) If on April 1, 2020 the 3-month LIBOR turns out to be 1.4% p.a., Eurodollar futures price 98.63 what would be the total cost to John Jones taking into account gains/losses on his hedge, plus the interest on the deposit (disregard time value of money)? (4 points)