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A company wishes to use financial futures to hedge its interest rate exposure. The company will...

A company wishes to use financial futures to hedge its interest rate exposure. The company will sell 10 Treasury futures contracts at $6.3k per contract. It is Jul and the contracts must be closed out in Dec of this year. Long-term interest rates are currently 13.34%. If they increase to 14.92%, assume the value of the contracts will go down by 1.2%. Also if interest rates do increase by 1.02%, assume the firm will have additional interest expense on its business loans and other commitments of $5.7k. This expense will be separate from the futures contracts.

Note: The term “k” is used to represent thousands (× $1,000).

Required: What percent of this $5.7k cost did the company effectively hedge away?

Answer:

-------------% Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).

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