Q 16.7. In the example from Exhibit 16.1, how would you purchase the equivalent of 5% of
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Q 16.7. In the example from Exhibit 16.1, how would you purchase the equivalent of 5% of the hypothetical MD firm's equity if all that was traded were the claims of the LD firm? (Hint: if you have d of the LD debt and e of the LD equity, you should end up with $0 in the bad-luck state and 5% of $66 in the good-luck state. How much d and e should you own? You need to solve two equations for two unknowns.)
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