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You are given the following quote for Eurodollar futures prices on Wednesday, March 1: Estimated Prior Day Month Open High MAR 23 94.9275 94.9275
You are given the following quote for Eurodollar futures prices on Wednesday, March 1: Estimated Prior Day Month Open High MAR 23 94.9275 94.9275 94.8950 APR 23 94.7350 94.7350 94.7100A MAY 23 94.5900 94.5950 94.5400A Low Last Change Settle Volume Open Interest 94.9100B -.0150 94.9125 94.7150 -.0150 94.7200 5,777 94.5650 -.0300 94.5750 1,953 45,405 779,830 47,950 5,821 a) John Jones wants to hedge a floating rate interest payment on a $2.2 million deposit. The next quarterly interest payment is determined according to a 3-month LIBOR on April 1, 2023. How could he use Eurodollar futures to do it (position, maturity, number of contracts)? If he entered into the futures position at Monday's close of 94.9475, what would be his cash flow due to marking to market on Tuesday and on Wednesday? c) What is the value of his futures position on Monday? d) If on April 1, 2023 the 3-month LIBOR turns out to be 5.32% p.a., Eurodollar futures price 94.7125 what would be the total cost to John Jones taking into account gains/losses on his hedge, plus the interest on the deposit (disregard time value of money)?
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