A security is a tradable contract that entitles its owner to certain rights, such as ownership in a company, a portion of its profits or assets, or the right to receive interest or dividends. Examples include stocks, bonds, and options. Choices A, B, C, and E describe banking and lending activities, which are not necessarily related to securities.

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A Security Is

Question 5

Multiple Choice

A security is

A) a private firm that accepts deposits and extends loans.
B) when savers deposit funds into banks,which then loan these funds to borrowers.
C) the date on which a loan repayment is due.
D) a tradable contract that entitles its owner to certain rights.
E) the risk that a borrower will not pay the face value of a bond on the maturity date.

Correct Answer: