Derivatives and Financial Management

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Questions and Answers

True or false: Financial management involves making decisions about acquiring and using funds to maximize the value of the firm?

True (A)

True or false: Derivatives are financial instruments that derive their value from an underlying asset or benchmark?

True (A)

True or false: Derivatives are only used by large corporations and financial institutions, and not by individual investors?

False (B)

What are some common types of derivatives that are used in financial markets?

Some common types of derivatives include options, futures contracts, swaps, and forwards. Signup and view all the answers

What is the purpose of derivatives in financial management?

Derivatives are used in financial management to hedge against price fluctuations, speculate on future market movements, and manage risk. Signup and view all the answers

Explain the concept of financial risk management and how it relates to derivatives.

Financial risk management involves identifying, assessing, and mitigating the risks faced by a company or individual. Derivatives are often used as tools for managing financial risks, such as interest rate risk, currency risk, and commodity price risk. Signup and view all the answers

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