1. Hot Needle Retail plc is seeking to borrow money to finance the development of its on-line retailing business using deep discount bonds.

These pay no interest during their life but a larger sum on maturity than was originally borrowed to reflect the compound interest rate foregone. It is offering to return to investors 100,000 after 10 years for every 50,000 loaned. An appropriate risk-adjusted interest rate is 7.5 per cent. Is this a good deal for investors?