Question 1 & 2 from section A and 1&2 from section B but could you break it down for me

1. What is Credit Risk and how can a financial institution use Credit Derivatives to manage this risk? 2. 'American call options should never be exercised early'. Is this statement true, false or uncertain? Fully explain your reasoning. SECTION B 1. Talbot Insurance Co. has a portfolio with a current value of 5 million and a beta of 1.2 with respect to the FTSE 100 . The FTSE 100 currently stands at 6200 points and the option contract size is 10 per index point. The risk-free rate of interest is 5% per annum and the dividend yield for both the index and the portfolio is 2%. If Talbot decides not to hedge, what will the value of its portfolio be in 6 months if the FTSE 100 stands at 6107 points? 2. The stock of Logrones Motors is currently trading at 120 and is expected to increase or decrease by 20% in each of the next two three-month periods. What is the current price of an American put option written on that stock with a strike price of 140, if the risk-free rate of interest is 5% per annum with continuous compounding