Which Statement Best Explains the Accounting for Compound Instruments

question 16

Multiple Choice

Which statement best explains the accounting for compound instruments?

• A)Once separated,each component is accounted for at fair value through profit or loss.
• B)Once separated,each component is accounted for in accordance with its substance.
• C)Once separated,each component is accounted for amortized cost.
• D)Once separated,each component is accounted for at historical cost.

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Definitions:

Hedge Funds

Investment funds that employ different strategies to earn active return, or alpha, for their investors, often including leverage, short-selling, and derivatives.

Managed Futures

Investment strategies that involve the use of futures contracts as part of a broader investment strategy managed by professional investment managers.

Market-neutral Hedge Funds

Investment funds that seek to generate returns by exploiting price differences between related assets while maintaining a neutral exposure to market movements.

Directional Long Funds

Investment funds that aim to profit from an anticipated upward movement in the price of the assets they hold.