Which One of the Following Best Describes the Purpose of Derivatives

question 32

Multiple Choice

Which one of the following best describes the purpose of derivatives markets?

• A) Transferring risk from one party to another.
• B) Investing for a short time period to earn a small rate of return.
• C) Investing for retirement.
• D) Earning interest income.

---

Definitions:

Depreciation

A method of allocating the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Market Value

The existing cost for acquiring or selling an asset or service in the unrestricted market.

Indefinite-Lived Intangible

An intangible asset that has no foreseeable limit on the period over which it is expected to contribute to the cash flow of a business.

Fair Value

The estimated market price of an asset or liability, reflecting the amount for which it could be exchanged in a current transaction between willing parties.