1. Suppose you have a loan of $10,000,000 outstanding, on which you will have to make a floating-rate interest rate payment on Wednesday, October 13. The interest payment is determined based on a 3-month LIBOR rate on that day. You fear that in the next several days the rate might rise. So you hedge yourself by trading Eurodollar futures. Assume that you enter into the position at close of day on Wednesday, October 6.

1. In order to hedge yourself, which position in Eurodollar futures will you take (i.e. buy or sell, contract maturity, and the number of contracts)?

2. What is the value of your futures position on Wednesday, October 6?

3. What is your daily gain or loss on your futures position (on Thursday, Friday, Monday, Tuesday, and Wednesday)?

4. What is the interest rate payment that you have to make on Wednesday, October 13, on your $10,000,000 loan?

5. What is the net cost to you, taking into account the gains/losses on your hedge, plus the interest payment on the loan (ignore the time value of money)?

Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/07/2021 (Thursday) Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest OCT 21 99.8750 99.8775 99.8750 99.8750 +.0075 99.8775 NOV 21 99.8550 99.8700 99.855099.8650+.0100 99.8650 DEC 21 99.8300 99.8400 99.8300 99.8350+.0100 99.8400 JAN 22 99.8600 99.8600 99.855099.8600+.0050 99.8600 FEB 22 99.8600 99.8600 99.8600 99.8600 UNCH 99.8600 28,678 71,634 145,298 11,801 1,512 401,869 150.274 1,153,949 58,354 12,321 Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/11/2021 (Monday) Month Open High Low Last Change Settle Estimated Volume OCT 21 99.8750 99.8775 99.8750 99.8775 +.0025 99.8750 NOV 21 99.8650 99.8650 99.8600 99,8650 UNCH 99.8600 DEC 21 99.8350 99.8350 99.8300 99.8300 UNCH 99.8300 JAN 22 99.8550 99.8550 99.8500 99.8550 UNCH 99.8550 FEB 22 99.8500 99.8500 99.8500 99.8500 -.0050 99.8500 20,079 1,985 28,717 297 30 Prior Day Open Interest 397,320 139.490 1,171,500 66,681 13,801 Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/13/2021 (Wednesday) Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest 392,865 OCT 21 99.8625 99.8650 NOV 21 99.8600 99.8650 DEC 21 99.8250 99.8300 JAN 22 99.8500 99.8500 FEB 22 99.8450 99,8450 99.8625 99.8625 -.0100 99.8625 99.855099.8600 UNCH 99.8600 99.8250 99.8250UNCH 99.8250 99.845099.8450 -.0050 99.8400 99.835099.8400 -0100 99.8350 19,585 62,513 131,883 4,806 496 139,895 1,159,573 80,947 13,806 3-month LIBOR rate: October 6, 2021 October 7, 2021 October 8, 2021 October 11, 2021 October 12, 2021 October 13, 2021 0.12400% 0.12363 % 0.12113 % 0.12175 % 0.12675 % 0.12375 % Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/07/2021 (Thursday) Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest OCT 21 99.8750 99.8775 99.8750 99.8750 +.0075 99.8775 NOV 21 99.8550 99.8700 99.855099.8650+.0100 99.8650 DEC 21 99.8300 99.8400 99.8300 99.8350+.0100 99.8400 JAN 22 99.8600 99.8600 99.855099.8600+.0050 99.8600 FEB 22 99.8600 99.8600 99.8600 99.8600 UNCH 99.8600 28,678 71,634 145,298 11,801 1,512 401,869 150.274 1,153,949 58,354 12,321 Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/11/2021 (Monday) Month Open High Low Last Change Settle Estimated Volume OCT 21 99.8750 99.8775 99.8750 99.8775 +.0025 99.8750 NOV 21 99.8650 99.8650 99.8600 99,8650 UNCH 99.8600 DEC 21 99.8350 99.8350 99.8300 99.8300 UNCH 99.8300 JAN 22 99.8550 99.8550 99.8500 99.8550 UNCH 99.8550 FEB 22 99.8500 99.8500 99.8500 99.8500 -.0050 99.8500 20,079 1,985 28,717 297 30 Prior Day Open Interest 397,320 139.490 1,171,500 66,681 13,801 Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/13/2021 (Wednesday) Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest 392,865 OCT 21 99.8625 99.8650 NOV 21 99.8600 99.8650 DEC 21 99.8250 99.8300 JAN 22 99.8500 99.8500 FEB 22 99.8450 99,8450 99.8625 99.8625 -.0100 99.8625 99.855099.8600 UNCH 99.8600 99.8250 99.8250UNCH 99.8250 99.845099.8450 -.0050 99.8400 99.835099.8400 -0100 99.8350 19,585 62,513 131,883 4,806 496 139,895 1,159,573 80,947 13,806 3-month LIBOR rate: October 6, 2021 October 7, 2021 October 8, 2021 October 11, 2021 October 12, 2021 October 13, 2021 0.12400% 0.12363 % 0.12113 % 0.12175 % 0.12675 % 0.12375 %