The Primary Use of Derivative Contracts Is

question 74

Multiple Choice

The primary use of derivative contracts is:

• A) for IRA and other pension plans since they only have value well into the future.
• B) to shift risk among investors.
• C) for investors seeking a greater return by taking greater risk.
• D) to add to the profits an investor obtains through information asymmetry.

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Definitions:

Going Private

A transaction or series of transactions in which a publicly traded company is transformed into a privately held one.

Freeze-Out

In corporation law, a type of oppression by which only minority shareholders are forced to sell their shares.

Right Of Appraisal

The process to determine the fair market value of an asset by a neutral third party or appraiser.

Greenmail

A situation where a company buys back its own shares from a potential acquirer at a higher price than the market value to prevent a hostile takeover.