Which of the following is best described as a derivative?
A) Common stock
B) Preferred stock
C) Municipal bond
D) Corporate bond
E) Interest rate swap

Question

Quizplus · Accepted Answer

Interest rate swaps are financial derivatives where two parties exchange interest rate cash flows, based on a specified principal amount. Unlike stocks and bonds, which are direct securities, derivatives like interest rate swaps derive their value from the performance of an underlying asset or benchmark.

Which of the Following Is Best Described as a Derivative