The Spot Price of the Market Index Is $900

question 21

Multiple Choice

The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. The market index rises to $920 by the expiration date. The annual rate of interest on treasuries is 4.8% (0.4% per month) . What is the difference in the payoffs between a long index investment and a long forward contract investment? (Assume monthly compounding.)

• A) $10.84
• B) $19.16
• C) $26.40
• D) $43.20

Understand the concepts of temporary and permanent differences in taxable and accounting incomes.

Apply the knowledge of enacted tax rates to compute deferred tax liabilities or assets.

Learn the implications of tax policies on a company’s financial statements, including loss carryforwards and carrybacks.

Analyze the impact of changes in tax rates on deferred taxes and financial statements.

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Definitions:

Machine Hours

A measure of the amount of time a machine is operated, often used for accounting, cost allocation, or operational planning.

Labor Hours

The total number of hours worked by all employees in a specific time period.

Marginal Product

The additional output that is gained by employing one more unit of a particular input, holding all other inputs constant.

Total Output

The quantity of goods and services produced by a firm or economy over a specific period.