Suppose Ms. Hunter anticipates a cash inflow of $9.875 million in September that she plans to invest in ten $1 million face value T-bills with a maturity of 91 days. Suppose there is a September T-bill futures contract trading at a discount yield of 5%.

a) (1 mark) Describe the interest rate risk that she is facing. Is it better if interest rates increase or decrease?

b) (1 mark) How could she lock in the purchase price on her T-bills?

c) (3 marks) What will be the locked in purchase price?