the zinn company plans to issue $10,000,000 of 20 year bond i june to help finance new research and development laboratory. the bond will pay interest seminnually. it is now november and the current cost of debt to the high risk biotech company is 11%. however, the firm financial manager is concernered that interest rate will climb every higher in coming months. the following date are available.

futures prices: treasury bond-100,000 pts 32nds of 100%

delivery month open high low settle change open interest

dec 94'28 95'13 94'22 95'03 +0.'07 591,944

mar 96'03 96'03 95'13 95'25 +0'08 120,353

june 95'03 95'17 95'03 95'17 +0'08 13,597

a. use the given data to create a hedge against rising interest rate

b. assume that interest rates in general increase by 200 basis points. how well did your hedge perform?

c. what is a perfect hedges? are any real world hedges perfect? explains