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:

Probability

The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Utility Function

A mathematical representation of how consumer preferences over a set of goods and services translate into choices given their budget constraint.

Probability

Probability measures the likelihood of a particular outcome or event occurring, expressed as a number between 0 and 1.

Utility Function

A mathematical representation that ranks preferences or satisfaction derived from consuming goods and services.