Financial Instruments and Obligations Quiz
Test your knowledge on financial instruments with these quiz questions covering debt instruments, derivatives, bonds, stocks, and more.
#1
Which of the following is an example of a debt instrument?
Common stock
Corporate bond
Preferred stock
Treasury bill
#2
Which of the following is not a type of derivative?
Futures contract
Options contract
Stock certificate
Forward contract
#3
Which of the following statements about bonds is true?
Bonds always have a fixed maturity date
Bonds are only issued by governments
Bonds cannot be traded in the secondary market
Bonds never pay periodic interest payments
#4
What is the key characteristic of a fixed-income security?
The returns are directly tied to the performance of the stock market
The issuer promises to make regular interest payments to the holder
They offer unlimited profit potential
They are highly liquid assets
#5
What is the main difference between a stock and a bond?
Stocks represent ownership in a company, while bonds represent debt
Stocks always pay fixed interest payments, while bonds do not
Stocks have a maturity date, while bonds do not
Stocks are less risky investments compared to bonds
#6
What is the primary function of a futures contract?
To buy or sell a specified asset at a predetermined price on a specified date
To issue dividends to shareholders
To provide voting rights in a corporation
To assess market sentiment
#7
Which of the following is not a characteristic of options?
Limited risk for the buyer
Obligation to buy or sell the underlying asset
Potential for unlimited profit for the seller
Expiration date
#8
What is the main difference between a call option and a put option?
Call options give the holder the right to buy, while put options give the holder the right to sell
Call options give the holder the right to sell, while put options give the holder the right to buy
Call options have higher premiums than put options
Put options have unlimited profit potential
#9
What is the term used to describe a financial contract that derives its value from an underlying asset?
Derivative
Commodity
Equity
Index
#10
What is the primary function of a mortgage-backed security (MBS)?
To provide ownership in a corporation
To insure against natural disasters
To pool together mortgages and sell interests in the pool to investors
To facilitate international trade
#11
Which of the following is true about convertible bonds?
They cannot be converted into equity shares
They offer fixed interest payments
They are only issued by governments
They can be converted into a specified number of equity shares
#12
What is the purpose of a credit default swap (CDS)?
To insure against the default of a borrower
To invest in foreign currency
To hedge against interest rate risk
To speculate on commodity prices
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