Exercise 3: a) A company makes a $50 000 deposit for six months at 6.40 per cent per annum simple interest. How much interest will the company earn? 2 b) A bank accepts a $15 000 deposit to mature in 135 days, and it pays 5.90 per cent per annum. How much interest will it have to pay? c) A bank accepts a deposit of $105 000 for a term of one year and 97 days, with an interest rate of 6.25 per cent per annum simple interest. Interest is payable six monthly and at the maturity date. How much interest will be paid in total?

Exercise 4: Discuss the nature and purpose of derivative products. In your answer consider the different types of derivative products, the risks managed by these products and the differences between exchange-traded contracts and over-the-counter contracts.

Exercise 5: Define a futures contract. Describe the basic principles behind the use of futures contracts to manage risk exposures.