Which of the Following Financial Instruments Have the Following Characteristics

question 64

Multiple Choice

Which of the following financial instruments have the following characteristics?

• A) Equity funds and derivatives have no maturity
• B) Bonds have high liquidity
• C) Stock indices cannot be sold short
• D) Shares have no reinvestment risk
• E) Exchange-traded fund (EFT)where investors pay a commission as high as 8.5%

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Definitions:

Deadweight Loss

The reduction in economic performance that is seen when a good or service fails to achieve the equilibrium in a free market.

Perfectly Competitive Industry

An industry structure characterized by many small firms, homogeneous products, and free entry and exit, leading to price-taking behavior.

AC

Short for Alternating Current, a type of electrical current in which the flow of electric charge periodically reverses direction.

Monopoly

A single-seller market scenario, in which the product offered is unique and lacks any near equivalents in the marketplace.