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What is the current interest rate-swipe technologies

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Swipe Technologies has $10 million of floating rate bonds that mature in 3 years and is concerned about interest rates rising in the next year. It wishes to hedge this risk with an interest rate futures contract. A one year Eurodollar futures contract is priced at 95.5.

a. What is the current interest rate?

b. Should the Treasurer buy or sell a futures contract?

c. If the interest rate in one year is 5.2% what would be the gain or loss on the futures contract in percent and dollar amount (notational of $10 m)?

d. What is the net gain or loss considering both the bonds and the futures contracts

Reference no: EM132515583

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