An example of a derivative financial instrument is a(n)
A) corporate bond.
B) option contract on U.S. Treasury bonds.
C) variable-rate mortgage.
D) preferred stock.

Question

Quizplus · Accepted Answer

An option contract on U.S. Treasury bonds is a derivative financial instrument because its value is derived from the underlying U.S. Treasury bond. The other options (A, C, and D) are not derivatives, but rather represent different types of securities (corporate bond, mortgage, and preferred stock, respectively).

An Example of a Derivative Financial Instrument Is A(n)