Financial instruments

Question 1

Financial instruments

Answer 1

A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.

Question 2

Equity instrument

Answer 2

Any contract that evidences a residual interest in the asset of any equity after deducting all of its liabilities

Question 3

Compound financial instruments

Answer 3

Both equity and liability portions
- Must be split
- Steps:
1st Find value of liability portion
Then balance back to equity portion
- Total value - liability value