If a Financial Manager Earning Interest on a Future Date

question 18

Multiple Choice

If a financial manager earning interest on a future date were to buy Futures and interest rates end up going down, 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:

Price

The sum of money envisaged, obligatory, or handed over as compensation for something.

Income

The money received by a person or organization for work, investments, or from other sources.

Utility Function

A quantitative model showing how buyers prioritize various combinations of products based on their happiness or usefulness.

Apples

A type of fruit that is grown worldwide and comes in various colors and flavors.