If a Financial Manager with an Interest Liability on a Future

question 1

Multiple Choice

If a financial manager with an interest liability on a future date were to sell 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:

Investing Activities

Financial transactions related to the purchase and sale of long-term assets and investments, as reported on a company's cash flow statement.

Net Cash

Net Cash refers to the amount of cash available after accounting for cash inflows and outflows.

Operating Activities

Activities that relate to the company's primary operations, such as sales, delivery of services, and production.

Net Cash

The net cash remaining following the calculation of cash incomes and expenditures.