Types of financial instruments

Question 1

Primary financial instrument

Answer 1

• Ordinary shares
• Preference shares
• Bonds
• Debentures

Question 2

Derivatives financial instrument

Answer 2

The value changes in reaction to a change in the
value of an underlying item including:
Price of another FI, commodity process, indices, interest rates, foreign exchange rates

Question 3

Derivative financial instruments have?

Answer 3

• minimal initial cost

- Settled in the future

Question 4

Examples of derivative FI?

Answer 4

“Swaps”
Financial term contracts (FTCs)
Options
Foreign exchange contracts (FECs) (Chapter 4 – FEC)