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You are given the following quote for Eurodollar futures prices on Wednesday, 10/21/20: Month Open High Low Last Change Settle Estimated Volume Prior Day Open

You are given the following quote for Eurodollar futures prices on Wednesday, 10/21/20:

Month

Open

High

Low

Last

Change

Settle

Estimated Volume

Prior Day Open Interest

OCT 20

98.9800

98.9900

98.8800

98.8925

-.0800

98.9100

115,807

514,892

NOV 20

99.2700

99.2750

99.1350

99.1900

-.1050

99.1900

88,625

136,818

DEC 20

99.4500

99.4550

99.3600

99.4150

-.0450

99.4150

343,832

1,575,169

a) John Jones wants to hedge a floating rate interest payment on a $3.2 million loan. The next quarterly interest payment is determined according to a 3-month LIBOR on Nov 1, 2020. How could he use Eurodollar futures to do it (long/short, how many contracts, contracts maturity)?

b) If he entered into the futures position at Monday close of 99.25, 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 Nov 1, 2020 the 3-month LIBOR turns out to be 1% p.a., Eurodollar futures price 99.05, what would be the total cost to John Jones taking into account gains/losses on his hedge, plus the interest payment (disregard time value of money)?

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