11 Questions
What is the main characteristic of a derivative?
Its value is derived from changes in the price of an underlying asset
How does a forward contract differ from a futures contract?
Futures contracts are agreements to buy/sell at a predetermined price, while forward contracts are agreements based on current market prices.
What is the primary difference between call and put options?
Call options provide the right but not the obligation to purchase, while put options provide the right but not the obligation to sell.
Which type of derivative contract is customizable and traded over the counter?
Forward contract
What does an option contract provide the buyer with?
Right but not obligation to buy/sell at a predetermined price
What is the main difference between publicly held and privately held firms?
Privately held firms sell their securities to a small group of investors, while publicly held firms sell their securities to the general public.
What is the role of an underwriter in the issuance of securities?
An underwriter evaluates and assumes another party's risk, acting as a middleman in marketing securities.
Which statement accurately describes privately held firms?
Privately held firms are not obligated to release financial statements to the public.
What differentiates publicly held firms from privately held firms regarding ownership?
Publicly held firms are owned by individuals or corporations, while privately held firms are owned by founders, managers, private investors, or families.
What is a common feature of both privately held and publicly held firms?
Both types of firms are obligated to release financial statements to the public.
Which characteristic applies to the role of an underwriter in evaluating risk?
Underwriters make informed decisions on whether to approve or deny an application for insurance or investment.
Learn about derivatives, a financial instrument whose value is derived from another asset known as the underlying. Explore the four major types of derivative contracts including futures and forwards.
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