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1 FINANCE MCQS

The type of financial security having payoffs linked to previously issued securities is called:

  • Linked security
  • Previous security
  • Payoff security
  • Derivative security
Correct Answer: D. Derivative security

Detailed Explanation

A derivative security is a financial instrument whose value or payoff is based on an underlying asset or previously issued security. Common examples include options, futures, and swaps. These instruments are widely used for hedging risk, speculation, and managing financial exposure in markets.

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