Suppose you have a loan of $10,000,000 outstanding, on which you will have to make a floating-rate interest rate payment on Monday, October 7th. 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 Tuesday, October 1st. a. 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)? b. What is the value of your futures position on Tuesday, October 1st? c. What is your daily gain or loss on your futures position (on Wednesday, Thursday, Friday, and Monday)? d. What is the interest rate payment that you have to make on Monday, October 7th, on your $10,000,000 loan? e. 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: 10/02/2019 (Wednesday)

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
OCT 19	97.9800	98.0075	97.9700	97.9975	+.0250	97.9950	26,539	340,133
NOV 19	98.0600	98.1000	98.0400	98.0900	+.0450	98.0850	19,240	268,998
DEC 19	98.0900	98.1450	98.0650	98.1350	+.0550	98.1350	352,075	1,703,152
JAN 20	98.2150	98.2750	98.1950	98.2650A	+.0600	98.2650	4,487	62,381
FEB 20	-	98.3450B	-	98.3450B	+.0700	98.3750	0	7

Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/04/2019 (Friday)

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
OCT 19	98.0100	98.0175	97.9750	97.9825	-.0100	98.0000	55,790	357,652
NOV 19	98.1250	98.1300	98.0850	98.1050	-.0150	98.1150	43,052	266,154
DEC 19	98.1950	98.1950	98.1350	98.1550	-.0200	98.1700	428,461	1,653,143
JAN 20	98.3300	98.3350	98.2850	98.2950	-.0200	98.3150	16,864	73,647
FEB 20	98.4250	98.4250	98.4250	98.4250	-.0150	98.4350	40	121

Daily Settlements for Eurodollar Futures (FINAL) Trade Date: 10/07/2019 (Monday)

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
OCT 19	97.9875	98.0100	97.9875	97.9975	-.0025	97.9975	32,598	362,677
NOV 19	98.1100	98.1300B	98.0850	98.1000	-.0150	98.1000	29,208	272,004
DEC 19	98.1650	98.1900	98.1300	98.1350	-.0250	98.1450	209,787	1,638,473
JAN 20	98.3100	98.3100	98.2700	98.2700	-.0300	98.2850	1,765	98,622
FEB 20	-	-	98.4150A	98.4150A	-.0300	98.4050	0	121

3-month LIBOR rate:

October 1, 2019 2.08863

October 2, 2019 2.05638

October 3, 2019 2.04313

October 4, 2019 2.02700

October 7, 2019 2.01200