$1.$ Based on the current market rates for bonds of Frenza, Nelo, and Lika, which of the following bonds do lenders believe has the highest risk level?

$2.$ If Frenza decided to issue new bonds with a contract rate of $11\%,$ would these new bonds be sold at a discount or premium based on the current market rate for Frenza bonds?

$3.$ Frenza is planning an $$160,000$ expansion to launch a new product line. Frenza currently earns $$100,000$ in net income, and the new product line will yield $$50,000$ in additional income before any interest expense. Frenza has three options: $(1)$ do not expand, $(2)$ expand and issue $$160,000$ in debt that requires payments of $8\%$ annual interest, or $(3)$ expand and raise $$160,000$ from equity financing. For each option $1,2,$ and $3,$ compute $($a$)$ net income and $($b$)$ return on equity $($Net income $-$: Equity$).$ Ignore any income tax effects.