1) What is the duration of the debt?

2) What is the volatility of the firm?

3) What is the value of the equity?

Next 3 questions. Assume value of airline's assets is sum of market value of airline routes = $1.1 Billion Airline has 4 debt issues with following characteristics Face value Coupon duration 100M 14% 12.ly 120M 12% 10.2y 200M 11% 8.5y 700M 12.5% 2y Let's assume 70% equity and 30% debt based on market values and number shares The firm is rated B. Although firm's bonds are not traded similar B-rated bonds have annualized standard deviation of 11% The correlation between B-rated bonds and this airlines stock price is 0.40. The firm pays no dividends The current T-Bond rate is 2% Assume firm is 30% debt and 70% equity (based on market value) The volatility of equity is 0.25 and volatility of debt is 0.15 . Next 3 questions. Assume value of airline's assets is sum of market value of airline routes = $1.1 Billion Airline has 4 debt issues with following characteristics Face value Coupon duration 100M 14% 12.ly 120M 12% 10.2y 200M 11% 8.5y 700M 12.5% 2y Let's assume 70% equity and 30% debt based on market values and number shares The firm is rated B. Although firm's bonds are not traded similar B-rated bonds have annualized standard deviation of 11% The correlation between B-rated bonds and this airlines stock price is 0.40. The firm pays no dividends The current T-Bond rate is 2% Assume firm is 30% debt and 70% equity (based on market value) The volatility of equity is 0.25 and volatility of debt is 0.15