Question

Exchange-traded notes (ETNs) are:

Options:
A) Unsecured debt securities issued by financial institutions, such as banks.
B) Equity shares in exchange-traded funds.
C) Physical commodities traded on stock exchanges.
D) Government-issued treasury bonds.

Answer 1

ETNs are unsecured debt securities issued by financial institutions, not to be confused with government bonds like Treasury notes and bonds which are low-risk investments backed by the U.S. government.

Step-by-step explanation:

Exchange-traded notes (ETNs) are unsecured debt securities issued by financial institutions such as banks. They differ from government-issued treasury bonds, which are secured by the full faith and credit of the issuing government, making them very low-risk. ETNs are more akin to corporate bonds, but they trade on stock exchanges similar to stocks, and their return is linked to the performance of a market index or other benchmark.

Treasury notes and treasury bonds are types of government bonds with maturities ranging from 2 to 10 years and more than 10 years up to 30 years, respectively. These, along with treasury bills which have shorter maturities, are sold not just in the United States but globally to individuals, banks, and sovereign funds due to their reputation as safe investments.Exchange-traded notes (ETNs) are unsecured debt securities issued by financial institutions, such as banks. They are not equity shares in exchange-traded funds (ETFs) or physical commodities traded on stock exchanges. Therefore, the correct answer is A) Unsecured debt securities issued by financial institutions, such as banks.