A financial asset is considered a security if
A)the owner of the security receives dividends and realizes a capital gain when the asset is sold.
B)it can be sold in a secondary market.
C)its value increases after it is sold in a primary market.
D)its value is secure; that is, the owner will not suffer a financial loss when the asset is sold.
E)the asset is not easily transferred from one party to another.

Question

Quizplus · Accepted Answer

A security is any financial asset that can be traded on a secondary market, meaning it can be bought or sold by investors other than the initial issuer. The fact that it can be sold on a secondary market is what distinguishes it from non-securities, such as bank deposits or loans. The other choices do not fully capture the definition of securities. For example, not all securities pay dividends, and not all securities appreciate in value after being sold in a primary market. Additionally, the owner of a security may suffer a financial loss if the value of the asset decreases, so security ownership does not guarantee the absence of financial risk. Finally, whether an asset is easily transferred or not is not the defining feature of a security.

A Financial Asset Is Considered a Security If