If a financial manager with an interest liability on a future date were to sell Futures and interest rates end up going up, 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.

Question

Quizplus · Accepted Answer

When interest rates go up, the price of futures contracts typically falls. Since the financial manager has sold futures (short position), a fall in futures prices means they can buy back the futures at a lower price, thus earning a profit.

If a Financial Manager with an Interest Liability on a Future