Assume that the six month sterling contract on the London International Financial Futures and Options Exchange is traded in units of £500,000. (1) The finance manager of a company lends 2 million pounds for 6 months at an interest rate of 5.75%. After six months, the loan would be extended and the finance manager was worried that interest rates would rise at that time, so he decided to hedge his interest rate risk by selling six-month LIFUE short-term sterling futures.

How many contracts does he need to sell?

(2) If the finance manager lends 2 million pounds (long) at the interest rate of 5.75%, and the loan is extended after 6 months, ① if he expects the interest rate to fall after 6 years, what will he do to hedge the risk? ② How many copies does he need to operate?