You borrow money and your hedge against the rise in LIBOR. Hence, you short 13 Eurodollar futures contracts for hedging. The final settlement price is 96.5 (=100-3.5). Gain in the contract: (98-96.5) x $2,500 x 13 contracts = $48,750 The actual loan payment on 16th June is $12.8 million x (3.5+0.5%) x 90/360 = $128,000. Assume you re-invest the gain from the futures in LIBOR and it grows to $48,750 x (1+3.5% x 90/360) = $49,176.5625 The actual loan payment is $128,000 - 49,176.5625 = $78,823.4375 The actual loan rate is 78,823.4375/$12.8 million x (360/90) = 2.4632%.