= A firm is issuing two-year debt in the amount of $200,000. The current market value of

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= A firm is issuing two-year debt in the amount of $200,000. The current market value of the assets is $300,000. The risk-free rate is 6 percent, and the standard deviation of the rate of change in the underlying assets of the borrower is 10 percent. Using an options framework, determine the following: The current market value of the loan. The risk premium to be charged on the loan.

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