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1. Explain why issuing equity is equivalent to issuing a call option on the company value 2. What is the replicating portfolio for ZC in

1. Explain why issuing equity is equivalent to issuing a call option on the company value

2. What is the replicating portfolio for ZC in this model? ( proof is required)

3. Show that the put-call parity is equivalent to the classical formula D + E = Company Value in the model set up in the previous question.

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