Question #2. Short Description/Analytical Questions (30 points) . (a). [Corporate Debt] A corporation in need of debt financing were facing the following alternatives Option 1, taking on a bank loan at interest rate of 4%. Option 2, issuing corporate bond at 3% interest rate The corporation eventually decided to take on the bank loan (Option 1). Using your knowledge of bank loans and corporate bond, explain what might be the rationale for the company to choose the higher interest option? (b). You can trade (long/short) two assets, asset f is risk-free with expected return r/ = 2%, and standard deviation of return equals to ?f-0. Asset m is risky with expected return of E (rm) Pm-8% and standard deviation of return equals ?m-6%. In addition, assume p,n/-0. You plan to invest in a portfolio of asset f and asset m. The portfolio weights on each assets adds up to 1 If you are seeking an expected portfolio return that equals Mp-12%, what values do you assign to W, and Wm, respectively? In this case, what is the associated portfolio standard deviation o Explain your trading strategy in layman's terms. . (c). What's the equivalent annual cost for a car that costs an initial outlay of 30,000 in year 0, and 5.000 each year from year 1 through year 15? Assume a discount rate of 4%. Draw the timeline and show your work