Investment Vehicles and Instruments Flashcards
6 cards from real Investment practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Investment Vehicles and Instruments flashcards as text
What is a futures contract?
Answer: An agreement to buy or sell an asset at a predetermined price on a specific future date
A futures contract obligates the buyer to purchase and the seller to sell an asset at a set price on a specified future date, commonly used for commodities and financial instruments.
What is a zero-coupon bond?
Answer: A bond that pays no periodic interest but is sold at a discount and redeems at face value
A zero-coupon bond pays no periodic interest; instead, it is issued at a deep discount and redeems at full face value at maturity, with the difference representing the investor's return.
What is an index fund?
Answer: A passively managed fund designed to replicate the performance of a specific market index
An index fund passively tracks a market index like the S&P 500, offering broad market exposure with low fees and minimal active management.
What is a hedge fund?
Answer: A private, actively managed investment fund using diverse strategies to generate returns for accredited investors
Hedge funds are private investment vehicles available to accredited investors that use aggressive strategies including leverage, derivatives, and short selling to seek absolute returns.
What is a convertible bond?
Answer: A bond that can be exchanged for a fixed number of shares of the issuing company's stock
A convertible bond is a hybrid debt security that pays interest like a regular bond but can be converted into a predetermined number of the issuer's common shares.
What is the primary difference between a stock and a bond?
Answer: Stocks represent ownership in a company while bonds represent a loan to a company or government
Stocks give investors partial ownership of a company with potential for growth and dividends, while bonds represent debt instruments where the issuer pays periodic interest and returns principal at maturity.