Which of the Following Is NOT Generally Correct About Financial

question 177

Multiple Choice

Which of the following is NOT generally correct about financial engineering?

• A) Financial engineering is frequently used to hedge risk.
• B) Financial engineering uses available financial instruments to create new securities.
• C) The investments created by financial engineers are often riskier than the underlying securities.
• D) In a world where prices are stable, there would be little demand for financial engineering.
• E) Financial engineering is not a growth industry because the world is becoming less risky.

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Definitions:

Incurred

Refers to the recognition of expenses or liabilities that have been consumed or acquired in the course of business operations.

Accrued Expense

Expenses that have been incurred but not yet paid for, recognized in the financial statements through adjusting entries.

Employees' Salaries

Regular payments made to employees for their service to an organization, typically agreed upon and fixed in a contract.

Comprehensive Insurance

An insurance coverage that protects against a wide range of perils, excluding certain specified exclusions.