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Derivatives Basics Quiz

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What is a derivative in the context of finance?

A fixed interest rate investment

A direct ownership of shares in a company

A speculative investment in commodities

A financial contract whose value is based on the price of an underlying asset (correct)

How do derivatives allow investors to speculate on price movements?

By directly owning the shares of the underlying asset

By entering into a contract based on the asset's value changes (correct)

By avoiding any financial contracts

By relying on fixed interest rates

What determines the profit or loss for investors in derivatives?

The number of shares owned

How the asset's value changes (correct)

The company's reputation

The fixed interest rate

If an investor thinks that the price of shares of HDFC Bank may rise in the future, how can they speculate on this price movement without owning shares of HDFC Bank?

<p>By buying derivatives of HDFC Bank</p> Signup and view all the answers

What is the primary function of an equity derivative in finance?

<p>To bet on the future price movement of the underlying shares</p> Signup and view all the answers

Derivatives Basics Quiz

Choose a study mode

Podcast

Questions and Answers

What is a derivative in the context of finance?

How do derivatives allow investors to speculate on price movements?

What determines the profit or loss for investors in derivatives?

If an investor thinks that the price of shares of HDFC Bank may rise in the future, how can they speculate on this price movement without owning shares of HDFC Bank?

What is the primary function of an equity derivative in finance?

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