The Purpose of Derivatives Is To

question 73

Multiple Choice

The purpose of derivatives is to:

• A) increase the risk so the return is larger.
• B) eliminate risk for both parties in the transaction.
• C) postpone the risk for both parties in the transaction.
• D) transfer the risk from one person to another.

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Definitions:

Complex Businesses

Enterprises that operate in multiple industries or markets, have various products or services, and face multifaceted management challenges.

Balance Sheet

A financial statement that displays a company’s assets, liabilities, and shareholders' equity at a specific point in time.

Double-entry Bookkeeping

A bookkeeping method in which each transaction is entered twice, with one entry being recorded as a debit in one account and a corresponding credit in another.

Income Linkage

The connection or relationship between different sources of income or its impact on economic status.