A derivative instrument:
A. is a low-risk financial instrument used by highly risk-averse savers.
B. gets its value and payoff from the performance of the underlying instrument.
C. should be purchased prior to purchasing the underlying security.
D. comes into existence after the underlying instrument is in default.
Answer: B
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When a price ceiling is set below the equilibrium price, the quantity supplied ________ the quantity demanded and ________ exists
A) is less than; a surplus B) is less than; a shortage C) is greater than; a surplus D) is greater than; a shortage E) equals; an equilibrium
Observers of the economy often complain that indicators of economic activity are often contradictory. This is an example of the ________ lag
A) data B) recognition C) legislative D) effectiveness
Suppose we advertise up to the point where the last dollar spent on advertising generates an additional dollar of sales revenue (i.e, the marginal revenue of advertising equals one)
If the full marginal cost of advertising is greater than one, then we will generate: A) less output than the profit maximizing level. B) more output than the profit maximizing level. C) the profit maximizing level of output. D) We don't have enough information to answer this question.
The maximum possible profit that could be earned by a cartel is: a. greater than the monopoly profit
b. equal to the monopoly profit. c. less than the monopoly profit. d. unrelated to the level of monopoly profit.