Question
1. Consider a firm with zero-coupon bonds that mature in 6 months and combined face value of $90,000. The market value of the firm's assets
1. Consider a firm with zero-coupon bonds that mature in 6 months and combined face value of $90,000. The market value of the firm's assets is $95,000 and the standard deviation of returns of the assets is 25%. The risk-free rate is continuously compunded 6%. What is the YTM on the bonds (semiannually compounded)?
| Correct Answer: | 14.19% |
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Personal Finance Turning Money Into Wealth
Authors: Arthur Keown
8th Edition
0134730364, 978-0134730363
