You are given the following data on the 3 month sterling interest rate futures contract. The contract has a notional size of 1 million. Sterling futures contract June 2012 97 (i) Explain what the sale of such a contract implies. (ii) If you think 3 month interest rates in June 2012 will be 2% would you buy or sell the contract? Explain your reasoning and the profits you can expect if you are correct. (iii) Briefly explain how a corporate Treasurer who is looking to lend 1 million of funds for 3 months from June 2012 might use the above contract to hedge interest rate risk