QUESTION ONE Mr Max Emilian Verstappen is a Belgian-Dutch racing driver who competes under the Dutch flag in Formula One with Red Bull Racing. As part of his ambitions, he intends to race in the Indy Car Racing in the United States of America after he leaves Formula One. He will require to purchase his own racing car. The racing car he intends to purchase will cost US$250,000.00 and he reckons to finance it 100 percent through a debt facility with one of the local Dutch banks. The debt is to be repaid in equal semi-annual payments for a period of three years at an annual interest rate of 16 percent. He is concerned about meeting the semi-annual payments from his savings in Formula One which fluctuate from time to time depending on the races he wins. He has asked you to draw up an amortization schedule showing the semi-annual payments that he would on this loan, which he can use for his cash flow planning purposes. need to make (Ignore transaction fees, commissions and other upfront fees for accessing the loan) (20marks) Total(20 marks) QUESTION TWO (b) Explain why some bonds sell at a premium over par value while other bonds sell at a discount. (8 marks) (c) What do you know about the relationship between the coupon rate and the YTM for the following types of bonds? (i) Premium bonds? (i) Discount bonds? (ili) Bonds selling at par value? (12 marks) Total (20 marks) QUESTION THREE EasyHealth Limited is a five year private limited company specialized in the manufacture of a range of health drinks, foods and supplements aimed at the fitness market. At present their biggest customers are health food shops and fitment centers. However, now that their brand has become established, the wealthy owners, who also manage the business are convinced that sales could be increased dramatically through the opening of an internet shop. They are currently considering how best to fund the expansion of the business. Funds would be needed to set up the website, expand manufacturing at the factory and employ more staff to deal with administration, dispatch and delivery of the 2 24