Which of These Is an Example of a Derivative

question 13

Multiple Choice

Which of these is an example of a derivative?

• A) In January, you sign a contract that you will buy a farmer's hay in August, and you fix the price at that time.
• B) In January, you take an option on the hay, agreeing that you have the right to buy it in August, but not the obligation.
• C) In January, you buy the farmer's land and hire the farmer to grow hay for you.
• D) Both (a) and (b) are examples of derivatives.
• E) All of (a), (b), and (c) are examples of derivatives.

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Definitions:

Bankruptcy Code

A federal law that outlines the various procedures for conducting bankruptcy cases, allowing debtors to eliminate or reorganize their debts under the supervision of the court.

Trustee

An individual or entity appointed to manage and hold property or assets on behalf of others, often used in trust arrangements and bankruptcy proceedings.

Creditors

Individuals, businesses, or institutions to whom money is owed by debtors.

Straight Bankruptcy

A term sometimes used for Chapter 7 bankruptcy in the United States, where a debtor's assets are liquidated to pay off creditors.