Question 1 (40 marks) a) Khaleef, a football player is negotiating with BBB Club regarding his contract. His opportunity cost is 6%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contracts are as follows: Year Contract 1 Contract 2 RM5,000,000 RM4,000,000 RM5,000,000 RM5,000,000 RM5,000,000 RM6,000,000 RM5,000,000 RM7,000,000 Contract 3 RM8,000,000 RM4,000,000 RM4,000,000 RM4,000,000 As adviser, which contract would you recommend that he accept? (10 marks) b) Mr Khaleef needs RM40,000 to buy her dream car. In her search for the best (low cost) loan, she has gathered the following information from three local banks. Which bank would you recommend Mr Khaleef borrow from? Bank Annual Payment A B RM16,652.80 12,618.30 10,822.50 Term (years) 3 4 5 (10 marks) c) To expand its operation, Dhadibas Tools Inc. has applied to the International Bank for a 3 year, RM50, 000 loan. Prepare a loan amortization table assuming 8 percent rate of interest. (10 marks) d) If you assume market interest rates are expected to increase over the term of the loan, would you prefer loan with a fixed rate for the life of the loan or rather a loan with a variable rate that changes in response to market interest rates? (Assume that both loans start with the same interest rate.) Would your answer change if market interest rates are expected to decrease over the term of the loan? (10 marks)