Derivative Contracts Provide ________

question 32

Multiple Choice

Derivative contracts provide ________.

• A) issuers and investors an expensive but efficient way of controlling some major risks.
• B) issuers and investors an inexpensive way of controlling some major risks.
• C) issuers and investors an inexpensive but inefficient way of controlling all major risks.
• D) issuers and investors an expensive way of controlling some minor risks.

---

Definitions:

Paid-in Capital

The amount of capital "paid in" by investors during common or preferred stock issuances, including the par value of the shares and amounts over par value.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often with dividends that are paid out before common stock dividends.

Common Stock

A type of equity security that represents ownership in a corporation, with holders typically having voting rights and receiving dividends.

Minimum Legal Capital

The least amount of capital that a company is required to maintain by law, intended to protect creditors by ensuring the company has enough assets to meet its obligations.