In the table below, choose the derivative instrument on the left side that best matches the example
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In the table below, choose the derivative instrument on the left side that best matches the example on the right side. There is one example for each instrument.
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Type of derivative Option Warrant Forward Future Swap Example A company contracts to sell 10,000 ounces of gold at $1,100/ounce on March 15, 2021, on the Chicago Mercantile Exchange. A company contracts with an investment bank to pay the bank 5% interest on $25 million of debt in exchange for receiving LIBOR + 1% from the bank. (LIBOR is the London Interbank Offered Rate, similar to the prime rate.) A company purchases the right, but not the obligation, to purchase US dollars for C$1.02/US$1 within a 90-day period. Company X contracts to buy 10,000 ounces of gold at $1,100/ounce on March 15, 2021, from Company Y. An investor purchases a bundle of securities that includes 100 common (ordinary) shares and the right, but not the obligation, to purchase another 100 shares in the same company at $20 each in five years' time.
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