Which of the Following Is the Basic Premise of a Derivative

question 39

Multiple Choice

Which of the following is the basic premise of a derivative?

• A) limiting the value of an asset attached to them
• B) transferring risk from one party to another
• C) linking shares to governmental bonds
• D) minimizing the risk for all parties involved
• E) maximizing the dividend payout on equities

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Definitions:

Mistake

An error about some aspect of a contract that destroys consensus.

Contract

An agreement between two or more parties that is legally binding and creates reciprocal obligations that can be enforced by law.

Wallpaper

Decorative material used to cover and adorn the interior walls of homes, offices, and other buildings.

Answering Machine

A device or system for recording incoming telephone messages when the recipient is unable to answer the phone.