Define the Term 'Derivatives

question 54

Essay

Define the term 'Derivatives'. What are the types of derivatives? Describe at least two uses for derivatives.

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Definitions:

Corporate Bonds

Debt securities issued by corporations to finance operations, typically offering fixed interest payments.

Convertible Bond

A type of bond that allows the bondholder to convert the bond into a predetermined number of shares of the issuing company, usually at certain times during its life.

Callable Bond

A kind of security that the issuer has the option to buy back prior to its maturity at a set price.

T-Bill Quote

The price or interest rate expressed for a Treasury bill; often quoted in terms of discount from face value.