Task 1. Performance objective:
(a) How do companies use financial derivatives to manage some of their risks?
(b) Identify several types of derivatives.
(c) Why use an options contract rather than a forward contract?
(d) Why let a put option expire; why exercise a call option?
(e) Are swap agreements traded internationally? If so, then provide an example.
Task 2. Problem-solving: Identify and describe two financial management practices that firms use to manage each of the following:
(a) liquidity risk;
(b) interest rate risk; and
(c) credit risk.