A Derivative Instrument

question 39

Multiple Choice

A derivative instrument:

• A)Comes into existence after the underlying instrument is in default
• B)Is a low-risk financial instrument used by highly risk-averse savers
• C)Gets its value and payoff from the performance of the underlying instrument
• D)Should be purchased prior to purchasing the underlying security

---

Definitions:

Cash Revenues

Income received by a company in the form of cash from its operational activities.

Revenues on Account

Earnings from sales or services that have been completed but not yet paid for by customers.

Unearned Revenues

Money received by a company for goods or services that have not yet been provided, classified as a liability on the balance sheet until the services or goods are delivered.

Fair Market Value

The price at which an asset would sell in the marketplace given willing, informed, and unpressured buyers and sellers.