The Two Distinguishing Characteristics of a Derivative Are

question 3

Multiple Choice

The two distinguishing characteristics of a derivative are

• A)one or more options and one or more exchange rates.
• B)one or more underlyings and one or more notional amounts.
• C)cash flows and economic exchange.
• D)a per share price and a quantity.

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Definitions:

Journal Entry

A record in the books of accounts that documents a financial transaction, showing the debit and credit effects.

Interest Expense

Costs incurred by an entity for borrowed funds, which are typically reported on the income statement within the financing or operating sections.

Notes Payable

A written promise to pay a specified amount of money, typically with interest, by a certain date, recorded as a liability on the balance sheet.

Cash

Refers to currency or assets that can rapidly be converted to currency, used by businesses for transactions and considered a current asset on the balance sheet.