Securities Trader Representative (Series 57) Practice Exam

The selection of stocks and bonds as an example of a financial instrument is accurate because financial instruments are contracts that can be traded and have monetary value. Stocks represent ownership in a company, providing a claim on its assets and earnings, while bonds are debt instruments, which signify a loan made by an investor to a borrower (typically corporate or governmental). Both of these serve as means for raising capital and can be bought, sold, or traded in the financial markets.

In contrast, real estate property is classified as a tangible asset rather than a financial instrument, as it does not inherently represent a monetary contract and is not typically traded like stocks or bonds. Cash transactions, while essential for financial activities, do not constitute a financial instrument on their own; they are simply the means of currency exchange rather than contracts or agreements. Personal loans can involve financial instruments (like promissory notes), but they are not categorized as standalone financial instruments, as they are specific agreements between two parties rather than tradable assets.