Question: 2) Your company has a $10 million variable rate debt outstanding and you are concerned about higher debt payment from rising interest rates over next

2) Your company has a $10 million variable rate debt outstanding and you are concerned about higher debt payment from rising interest rates over next 6 months. You decide to buy a Eurodollar future contract to protect against rising interest rates. The current 6-month Eurodollar futures contract interest rate is 2% LIBOR. Questions:

a) How many contracts you will need to buy?

b) Whats the profit or loss on the future contract if LIBOR rate increases to 2.25% 6 months later?

c) Whats the higher /lower interest payments when LIBOR rate increases to 2.25% 6 months later?

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