Which of the Following Is Not True Regarding Derivatives

question 59

Multiple Choice

Which of the following is not true regarding derivatives?

• A)A derivative is a financial instrument whose value is based upon another financial instrument, stock index or interest rate, or interest rate index.
• B)Derivatives can be classified into two general types: forward-based and option-based derivatives.
• C)Unrealized holding gains and losses on derivatives are not recognized.
• D)SFAS No. 133 values derivatives at fair value.

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Definitions:

American Firms

Companies that are incorporated in the United States, operating under American law and often symbolizing the business culture and practices of the U.S.

Elastic Product Demand

A situation where the demand for a product changes significantly in response to changes in the product's price.

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor costs.

Japanese Firms

Companies based in Japan, often characterized by unique business practices such as lifetime employment and strong government-industry cooperation.