The Definition of a Derivative Requires Which of the Following

question 15

Multiple Choice

The definition of a derivative requires which of the following characteristics to be met?
I Its value changes in response to a change in an underlying variable such as a specified interest rate,price or foreign exchange rate.
II It must be settled on a net basis.
III It requires no initial net investment or it is smaller than for other types of contracts expected to have a similar response to changes in market factors.
IV It is to be settled at a future date.

• A)I,II and III
• B)I,II and IV
• C)I,III and IV
• D)II,III and IV

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Definitions:

Least Profitable

Describes the product, service, or business segment that generates the smallest amount of profit relative to others.

Product Ranking

The process of ordering products based on criteria such as sales performance, profitability, or strategic importance.

Variable Selling Expense

Costs that vary directly with the level of sales, such as commissions and credit card fees, as opposed to fixed selling expenses like salaries.

Specialized Machine

Equipment designed for a specific, often complex, function or process within manufacturing or production, not readily substitutable.