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Questions and Answers
What is the primary characteristic of equity derivatives?
What is the primary characteristic of equity derivatives?
- They provide voting rights in the company issuing the derivative
- They offer a fixed rate of return over a specific period of time
- They allow investors to speculate on the future price movements of stocks (correct)
- They guarantee the repayment of the initial investment amount
What are equity derivatives?
What are equity derivatives?
- Financial instruments whose value is based on the price of an underlying stock (correct)
- Investment funds that hold a diversified portfolio of stocks and bonds
- Bonds that pay a variable interest rate based on the stock market performance
- Securities issued by a company that represent ownership in the company
How do equity derivatives differ from stocks?
How do equity derivatives differ from stocks?
- They have a fixed expiration date, while stocks can be held indefinitely
- They have voting rights in the company, while stocks do not provide voting rights
- They offer guaranteed dividends, while stocks may or may not pay dividends
- They derive their value from an underlying asset, while stocks represent ownership in a company (correct)
