The Financial Controller of Nointerest Ltd Has Planned That the Company

question 45

Multiple Choice

The financial controller of Nointerest 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 net dollar shortfall/gain.

• A)$2432
• B)$70
• C)$203
• D)$6

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