The type of financial security which have linked payoff to another issued security is classified as ___________?
Correct answer: B. derivative security
- A. linked security
- B. derivative security
- C. payable security
- D. non-issuing security
Explanation
A derivative security has a payoff linked to the value or performance of another security or underlying asset. The term linked security is descriptive but is not the standard classification.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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