Question:

It is February 1st, and Jerry will need to borrow $5,000,000 for 90-days next June. If

today's yield on 90-day bank bills is 3.5% p.a. and Jerry believes that 90-day interest

rates may fall to 3.0% p.a. by June. What futures position should Jerry take to hedge

this exposure? What borrowing rate would Jerry lock-in, if in June, the June and

September futures prices were 95.23 and 95.36 respectively?