What is a security?

• A. A fixed asset used as collateral
• B. Almost any type of investment (stock, bond, debenture, interest, etc.)
• C. A loan that must be repaid with interest
• D. A license to distribute a film

Answer: (B)

Securities are broad financial instruments that represent an investment of money in a venture or project with a reasonable expectation of profit to be derived from the efforts of others. This category includes equity and debt instruments, such as stocks, bonds, debentures, and other similar investment contracts.

The option that describes securities as “almost any type of investment (stock, bond, debenture, interest, etc.)” best fits this broad scope. It recognizes that many different kinds of financial instruments offered to investors fall under the umbrella of securities because they involve capital supplied by investors with an expectation of return.

The other choices point to things that aren’t securities by themselves: a fixed asset used as collateral is property held to secure a loan; a simple loan that must be repaid with interest is a debt instrument that may be a security in some contexts but isn’t itself, on its own, the broad concept of a security; a license to distribute a film is a license, not a financial instrument representing an investment.