Consider the following :
- Exchange-Traded Funds (ETF)
- Motor vehicles
- Currency swap
Which of the above is/are considered financial instruments ?
[amp_mcq option1=”1 only” option2=”2 and 3 only” option3=”1, 2 and 3 only” option4=”1 and 3 only” correct=”option4″]
This question was previously asked in
UPSC IAS – 2024
1. Exchange-Traded Funds (ETF): An ETF is a type of investment fund that trades on stock exchanges. It represents ownership in a portfolio of underlying assets. ETFs are securities and are considered financial instruments.
2. Motor vehicles: A motor vehicle is a physical asset (a tangible good). It is not a financial instrument. While financing related to buying a vehicle (like a car loan) or insuring it involves financial instruments, the vehicle itself is not one.
3. Currency swap: A currency swap is a derivative contract where two parties exchange principal and interest payments in different currencies. It is a type of financial derivative and thus a financial instrument.