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:

Pearson Correlation

A measure of the linear correlation between two variables, giving a value between -1 and 1 where 1 implies a perfect positive linear relationship, -1 implies a perfect negative linear relationship, and 0 implies no linear correlation.

Regression Line

A linear representation that best fits the distribution of data points in scatter plotting, predicting the relationship between dependent and independent variables.

Coefficient Of Determination

A statistical measure, often denoted as R^2, that represents the proportion of the variance in the dependent variable predictable from the independent variable(s) in a regression analysis.

Least-Squares

A mathematical approach used to minimize the sum of the squares of the differences between observed and predicted values.