Which of the following statements regarding derivative securities is/are true? S

ID: 2799061 • Letter: W

Question

Which of the following statements regarding derivative securities is/are true? Select one or more answers.

A. Derivatives are not "issued" by firms, instead they are contracts between secondary parties

B. If Apple common stock is the underlying asset in a derivative security, that derivative security will typically have been issued by Apple.

C. A futures contract is a type of derivative security.

D. Preferred stock is a type of derivative security.

E. The majority of large public firms use derivatives to hedge certain risks.

F. A derivative security represents ownership in whatever is the underlying asset.

A, C and E are correct.

Derivatives are not issued by firms. Hence B is incorrect.

Preferred stock is not a derivative security. Hence, D is incorrect.

Derivative security doesn't represent any ownership in the asset. Hence, F is incorrect.

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