A compound financial instrument is one that:
A. Transfers the risks of a primary instrument to another entity.
B. Effectively contains a financial liability and equity instrument.
C. Ultimately requires the exchange of a financial asset for an equity instrument.
D. Offers interest terms such that interest is paid on interest.
E. None of the given answers.

Question

Quizplus · Accepted Answer

B. Effectively contains a financial liability and equity instrument. A compound financial instrument is one that has both a liability and an equity component, such as a convertible bond.

A Compound Financial Instrument Is One That