Part 1Financial instruments with returns tied to previously issued securities are called:Part 2
A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

Question

Part 1Financial instruments with returns tied to previously issued securities are​ called:Part 2
A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

BlackTom AI · Accepted Answer

The question asks about financial instruments whose returns are tied to previously issued securities, and provides four options to evaluate.
Option A: 'A. financial derivatives' correctly describes instruments whose value and payoff depend on another asset, such as stocks or bonds that were issued earlier. Derivatives include options, futures, swaps, and other contracts whose payoff is derived from an underlying security.
Option B: 'B. reversible bonds' is not a standard category in mainstream finance. There is no widely recognized class called reversible bonds that define returns tied to previously issued securities.
Option C: 'C. hedge securities' sounds plausible in casual terms, but it is not a formal term for a class of instruments. Hedging can involve various instruments, but the label 'hedge securities' is not the recognized name for instruments whose values depend on underlying issued securities.
Option D: 'D. convertible bonds' are a specific type of bond that can be converted into equity, but their payoff structure is not defined as a direct return tied to another existing security’s price or performance. They have features of debt and equity conversion, not a general dependence on previously issued securities' returns.
Thus, among the options, the one that properly captures the concept of returns tied to an underlying, previously issued security is Option A: financial derivatives, which explicitly derive value from another asset.

Homework:Chapter 11 Homework

Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

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Similar Questions

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Which market involves the trading of derivative securities?

Which of the following is a hedging instrument? _____

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

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Homework:Chapter 11 Homework

Part 1Financial instruments with returns tied to previously issued securities are​ called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

View Explanation

Log in for full answers

Similar Questions

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Which market involves the trading of derivative securities?

Which of the following is a hedging instrument? _____

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

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Making Your Study Simpler

Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds