If a Financial Manager Earning Interest on a Future Date

question 32

Multiple Choice

If a financial manager earning interest on a future date were to buy Futures and interest rates end up going up, the position outcome would be:

• A) Futures price falls; short earns a profit.
• B) Futures price rises; short earns a loss.
• C) Future price falls; long earns a loss.
• D) Futures price rises; long earns a profit.

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Definitions:

Short-term Creditor

A creditor that provides loans or credit to a business or individual with an expectation of repayment within a short period, typically less than a year.

Liquidity

The ability of an asset to be quickly converted into cash without losing its value.

Basic Earnings Per Share

A financial indicator that measures the net income generated per outstanding stock share.