(a) Financial Engineering such as financial derivatives have been associated with several high-profile corporate events that shook the global financial markets over the past two decades. To some critics, derivatives have played an important role in the near collapses or bankruptcies of some big companies such as Enron in 2001, Lehman Brothers, and American International Group (AIG) in 2008, globally. Provide arguments for and against the use of financial derivatives by companies.

(b) KL Money Brokers (KLMB) manages a money-market fund for corporate clients. The size of the fund is RM 70 million, invested mostly in 6-month Government Securities. The returns approximate the 6-month KLIBOR. Based on its in-house research, KLMB expects short term rates to fall over the next few years. The firm is worried that falling short term rates will mean lower returns from its investments and reduced returns to its clients. What can KLMB do to maintain steady returns in the face of falling short term rates?