Solved

The Financial Controller of No Interest Ltd Has Planned That

question 6

Multiple Choice

The financial controller of No interest Ltd has planned that the company borrow using a 90-day bank bill facility with face value of $500 000 in four weeks.Interest rates on 90-day bank bills are currently 12% p.a.As a protection against possible interest rate increases,she has entered into a futures contract by selling one bank bill futures contract at a price of $88.50.After the four-week period,she reverses the futures position at $86.50 and issues a bank bill at a rate of 14% p.a.Calculate the dollar shortfall that Nointerest would have faced had it not entered into the futures contract.

Determine the conditions under which a purely competitive seller should produce or shut down in the short run.

Calculate economic profit or loss based on cost data and market prices.

Understand the law of diminishing returns and its impact on marginal cost.

Identify the conditions for a purely competitive firm to earn a normal profit in the short run.

Definitions:

EPS

Earnings Per Share represents the fraction of a firm's profits designated for each share of its common stock, serving as a financial metric.

Stock Dividend

A dividend payment made in the form of additional shares rather than a cash payout, typically to conserve the company's cash.

Capital Accounts

The accounts that show the net worth of a company or individual, including contributions from owners or partners and retained earnings.

Market Price

The current value at which an asset or service can be bought or sold in the marketplace.