Consider the following:

Question

1. Exchange-Traded Funds (ETF)

2. Motor vehicles

3. Currency swap

Which of the above is/are considered financial instruments?

(a) 1 only
(b) 2 and 3 only
(c) 1, 2 and 3
(d) 1 and 3 only

Answer 1

(d) 1 and 3 only

Explanation:

• Exchange-Traded Funds (ETF): ETFs are financial instruments that are traded on stock exchanges, much like stocks. They represent a basket of assets such as stocks, commodities, or bonds and are used by investors to diversify their portfolios.

• Motor vehicles: Motor vehicles are not considered financial instruments. They are physical assets used for transportation and do not represent any financial value in terms of investment or trading in financial markets.

• Currency swap: A currency swap is a financial instrument used in international finance to exchange principal and interest in one currency for the same in another currency. It is used to hedge against foreign exchange risk or to obtain cheaper foreign currency loans.

Therefore, only Exchange-Traded Funds (ETFs) and currency swaps are considered financial instruments, making option (d) the correct answer.