Final answer:
Stocks represent ownership in a company, bonds are debt instruments, options give the holder the right to buy or sell an underlying asset, and futures contracts involve agreements to buy or sell an asset in the future.
Step-by-step explanation:
A stock represents partial ownership in a company. When you buy a stock, you become a shareholder and have the potential to earn a share of the company's profits through dividends and capital gains. Stocks are traded on stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq. Example: Apple Inc. is a publicly traded company, and its stock is listed on the Nasdaq under the ticker symbol AAPL.
A bond is a debt instrument issued by a company or government entity to raise funds. When you buy a bond, you are essentially lending money to the issuer in exchange for periodic interest payments and the return of the principal amount at maturity. Bonds are traded in the bond market. Example: The U.S. Treasury issues Treasury bonds to finance government spending.
An option is a contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset (such as a stock) at a predetermined price within a specified period of time. Options can be used to hedge or speculate on the price movement of the underlying asset. Example: A call option on Apple stock gives the holder the right to buy Apple shares at a specific price.
A futures contract is an agreement between two parties to buy or sell an underlying asset at a predetermined price on a future date. Futures contracts are used to hedge against price volatility or speculate on the price movement of commodities, currencies, stock indexes, and more. Example: A futures contract for crude oil specifies the delivery of a certain quantity of oil at a specific price on a specified date.