PLEASE ASSIST ME...........

a) Futures contracts and options on futures contracts can be used to modify risk.

Required:

Identify the fundamental distinction between a futures contract and an option on a futures contract and explain the difference in the manner that futures and options modify portfolio risk. (10 marks)

b) Maendeleo Industries is concerned about interest rates rising. It needs to borrow in the bond market three months hence. The company believes that an option on treasury bond futures is the best hedging device.

i) Should the company buy a put option or a call option? Explain. (3 marks)