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A coffee shop has $500 in debt. And the current value of the coffee shops assets is $600. The shops analysts have proposed two plans,

A coffee shop has $500 in debt. And the current value of the coffee shops assets is $600. The shops analysts have proposed two plans, A and B, in order to maximize the value of equity growth over the next year. Under strategy A, the shops assets will remain at $600 with a probability of p, and decline to $500 with a probability of (1-p). Under strategy B, the shops assets will increase to $6000 with a probability of (1-p) and $0 with a probability of p. If you believe that p is equal to 0.62, and the discount factor is 10%, what is the interest rate on the firms debt today?

A. 10%
B. Not enough information
C. 900%
D. 0%

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