Which of the Following Is Not a Distinguishing Characteristic of a Derivative

question 60

Multiple Choice

Which of the following is not a distinguishing characteristic of a derivative instrument?

• A) Derivative instruments have terms that require or permit net settlement.
• B) Derivative instruments have a low initial net investment.
• C) Derivative instruments are highly effective throughout their term.
• D) Derivative instruments have one or more underlyings and notional amounts.

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Definitions:

Hourly Cost

The expense incurred for each hour of work performed, often used to calculate labor costs or pricing for services.

Variable Selling

Costs that vary directly with the volume of sales, such as commissions and shipping charges.

Administrative Expense

Administrative expense includes overhead costs not directly tied to a specific project or production process, such as salaries of executive staff, office supplies, and utilities.

Direct Labor-Hours

The amount of time spent by workers directly involved in manufacturing a product or delivering a service.