Question

What is the primary purpose of using derivatives in financial risk management?

a.

To increase financial risks

b.

To add intrinsic value to the contracts

c.

To speculate on market conditions

d.

To hedge risks and for speculative purposes

Posted under IC 89 Management Accounting

Answer: (d).To hedge risks and for speculative purposes Explanation:Derivatives are used in financial risk management for hedging risks as well as for speculative purposes to manage and mitigate exposure to financial risks.

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Q. What is the primary purpose of using derivatives in financial risk management?
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