Examlex

Solved

Explain How a Derivative Instrument May Be Used to Reduce

question 57

Essay

Explain how a derivative instrument may be used to reduce or avoid the exposure to risk associated with other transactions.


Definitions:

Marginal Tax Bracket

The tax rate that applies to the last dollar of the taxpayer's income, indicating how much tax will be paid on any additional income earned.

Municipal Bond

A debt security issued by a state, municipality, or county to finance its capital expenditures, usually exempt from federal taxes and, in some cases, state and local taxes.

Corporate Bond

A type of debt security issued by a corporation to raise funds from investors, who are owed repayment of the loan plus interest.

Futures Contract

A Futures Contract is a legal agreement to buy or sell a particular commodity or financial asset at a predetermined price at a specified time in the future.

Related Questions