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Multiple Choice
Which of the following is typically traded on a stock exchange?
A
Annuities
B
Bonds
C
Shares
Verified step by step guidance
1
Understand the concept of a stock exchange: A stock exchange is a marketplace where securities such as shares, bonds, and other financial instruments are bought and sold. It primarily facilitates the trading of equity securities (shares).
Clarify the nature of shares: Shares represent ownership in a company. When you purchase shares, you become a shareholder and own a portion of the company. Shares are commonly traded on stock exchanges like the NYSE or NASDAQ.
Differentiate between annuities, bonds, and shares: Annuities are contracts typically offered by insurance companies and are not traded on stock exchanges. Bonds are debt instruments that may be traded on bond markets but are not the primary focus of stock exchanges. Shares, on the other hand, are equity instruments and are the primary securities traded on stock exchanges.
Recognize the correct answer: Shares are the financial instruments that are typically traded on stock exchanges, as they represent equity ownership in companies.
Apply this understanding to similar questions: When asked about securities traded on stock exchanges, focus on equity instruments like shares, while understanding that other instruments like bonds may be traded in specialized markets.