Q4. On November 1, 2017, a bank agrees to lend a firm $10Million for 12 months, beginning on December 19, 2017 at LIBOR + 1%. Interest payments will take place on MAR 13, 2018, JUN 19, 2018, SEP 18 2018 and DEC 18 2018. Also, on DEC 18, 2018 the firm will repay the $10million.

The current IMM index futures levels are: 91.41 for DEC 2018; 91.61 for MAR 2018; 91.53 for JUN 2018 and 91.39 for SEP 2018. The bank decides to hedge its risk using h = 1. Every 3 - month Eurodollar time deposit futures = $1 million.

4.1 Use a timetable to show the spot and futures positions of the bank on November 1, 2017.

4.2 Use the same timetable to show the bank's spot and futures activities during the year given that the spot LIBOR was 9.54% on DEC 19, 2018; 7.75% on MAR 13, 2018; 6.44% on JUN 19 2018 and 5.88 on SEP 18 2018. On those specific dates the IMM index corresponding levels were: 90.46, 92.25, 93.56 and 94.12, respectively.