What is a prospectus?

A prospectus is a crucial legal document that provides detailed information about an investment offering. Its primary purpose is to inform potential investors about the features, risks, and terms associated with an investment opportunity. This includes details on the issuing company, the financial health of the offering, and any associated risks, helping investors make informed decisions.

The significance of a prospectus lies in its regulatory role, as it is required by law for certain types of investments, such as mutual funds and public offerings of securities. The document must be written in a manner that is accessible to investors, covering all essential components to ensure transparency and compliance with regulatory standards.

The other options, while related to financial concepts, do not accurately define a prospectus. A summary of a company’s financial performance, a marketing brochure for financial services, and a report on economic trends and forecasts serve different purposes and lack the specific legal and informative function that a prospectus holds in investment contexts.