1. Given the data in the table and the information below, please answer the following question. Show all working and formulas used.

Maturity (T)	r(1)	r(2)	r(3)	r(4)	r(5)	r(6)
Spot Rate (%)	0.05	0.18	0.31	0.28	0.12	0.07

Misty would like to invest 10,000. She is faced with the choice between 2 investments:

Option 1: invest for 6 years;

Option 2: invest for 1 year and reinvest for another 5 years at a forward rate of 0.11%

Which one is the optimal option to Misty, or she should be indifferent between the choices? [3 marks]

D. Four Cs of credit analysis is used by analysts to evaluate creditworthiness. For each of the following scenarios, which of the Four Cs should be used for evaluation? Please also explain your answers.

[4 marks]

Scenarios	Which of the Four Cs
1. Company Z has to pay $50,000 interest expense every year if debt is issued, but it only has an operating cash flow of $35,000 per year.
3. Company T decides to raise funds through debt issue. However, it operates in Video Rental industry, which is said to be a declining industry.