A Derivative Is a fiNancial Instrument Whose Value Is Determined

question 22

Multiple Choice

A derivative is a financial instrument whose value is determined by:

• A)regulatory body such as the FTC.
• B)a primitive or underlying asset.
• C)hedging a risk.
• D)hedging a speculation.
• E)None of the above.

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Definitions:

Equilibrium Price

The price at which the quantity of a good demanded equals the quantity supplied, leading to a stable market condition.

Federal Tax Policy

The set of laws and regulations established by the federal government to determine the amount of tax to be levied on individuals, corporations, and other entities.

Health Insurance Premiums

The periodic payments made to an insurance company to maintain active health coverage.

Taxable Income

Taxable income is the amount of an individual's or a corporation's income used to determine how much tax will be owed to the federal, state, or other governmental entity.