Wesley Corp. stock is trading for $25/share. Wesley has 20 million shares outstanding and a market debt-equity ratio of 0.5. Wesley’s debt is zero-coupon debt with a 5-year maturity and a yield to maturity of 10%.

a. Describe Wesley’s equity as a call option. What is the maturity of the call option? What is the market value of the asset underlying this call option? What is the strike price of this call option?

b. Describe Wesley’s debt using a call option.

c. Describe Wesley’s debt using a put option.

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