You are given the following data on the 3-month dollar interest rate futures contract

Subject:FinancePrice:2.86 Bought3

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You are given the following data on the 3-month dollar interest rate futures contract. The contract has a notional size of $1 million.

December 2021 Dollar futures contract 95.50

i. Explain what the sale of such a contract implies.

ii. If you think 3-month dollar interest rates in December 2021 will be 7% would you buy or sell the contract? Explain your reasoning and the profits you can expect if you are correct.

iii. Briefly explain how a Corporate Treasurer who is looking to lend $2 million of funds for 3 months from December 2021 might use the above contract to hedge interest rate risk.