Worksheets3.5 Derivative Securities Review
Total questions: 14
Worksheet time: 7mins
Name
Class
Date
1.
What defines a derivative security?
a)
A security that has no intrinsic value
b)
A security whose value is determined by an underlying asset
c)
A bond with fixed interest rates
d)
A stock with guaranteed returns
2.
Which of the following is NOT a major category of derivative securities?
a)
Swaps
b)
Forwards
c)
Options
d)
Bonds
3.
In an options contract, what does a 'call option' represent?
a)
The right to sell an asset
b)
The right to buy an asset
c)
A mandatory purchase requirement
d)
A guaranteed investment return
4.
What is the primary purpose of a futures contract?
a)
To guarantee investment returns
b)
To exchange cash flows immediately
c)
To exchange an asset at a predetermined future date
d)
To create instant liquidity
5.
What distinguishes futures from forwards?
a)
Futures are unregulated
b)
Futures are traded on organized markets with standardized features
c)
Futures cannot be traded quickly
d)
Futures do not involve commodities
6.
What is a swap primarily used for?
a)
Purchasing stocks
b)
Exchanging streams of cash flow based on certain events
c)
Creating permanent investments
d)
Eliminating market risk completely
7.
What are the two primary purposes of derivative securities?
a)
Investment and speculation
b)
Hedging and speculation
c)
Trading and banking
d)
Insurance and lending
8.
In hedging, what is the primary goal?
a)
To maximize profits
b)
To reduce price uncertainty
c)
To increase market volatility
d)
To eliminate all financial risk
9.
What makes derivatives particularly risky?
a)
They are always guaranteed
b)
Their values fluctuate based on uncertain events
c)
They have fixed returns
d)
They are government-regulated
10.
A put option gives the holder the right to:
a)
Buy an asset at a certain price
b)
Sell an asset at a certain price
c)
Trade unlimited assets
d)
Cancel a contract
11.
Which market do forward contracts typically trade in?
a)
Stock exchange
b)
Futures exchange
c)
Over-the-counter market
d)
Commodity market
12.
What determines the price of a derivative security?
a)
Government regulations
b)
The price of the underlying asset
c)
Random market fluctuations
d)
Investor sentiment
13.
In futures contracts, who are the primary participants?
a)
Bankers and accountants
b)
Hedgers and speculators
c)
Politicians and economists
d)
Lawyers and consultants
14.
What does a credit default swap primarily protect against?
a)
Stock market crashes
b)
Interest rate changes
c)
Credit repayment defaults
d)
Currency fluctuations
100 %
