D Question 1 Which of the following statements is correct in relation to risk management? Due to the high cost of hedging, firms should try to reduce their total exposure via natural hedges. O Value-at-Risk is an approach used to quantify the downside risk faced by firms. None of the other statements is correct in relation to risk management. Derivatives, such as options and forwards, can only be used for risk management purposes. More than one of the other statements is correct in relation to risk management. Question 2 2 pts Which of the following statements is correct in relation to real option analysis? Real option analysis is important when there is a high likelihood of new information arriving during the life of the project, even if managers are not able to respond to the new information. The option to abandon a project should never be exercised early if no cash flow is expected during the option life. More than one of the other statements is correct in relation to real option analysis. None of the other statements is correct in relation to real option analysis. The fact that the projects are evaluated using a hurdle rate lower than WACC is evidence consistent with managers using real option analysis. 2 pts