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A company has assets valued at $1,000 currently, and has debt outstanding with a face value of $850 that is due in 2 years. Annually,
A company has assets valued at $1,000 currently, and has debt outstanding with a face value of $850 that is due in 2 years. Annually, the assets are expected to grow at 4% with a volatility of 20%. The risk-free rate is 2%. Estimate the probability of default, expected loss and the present value of the expected loss on the companys debt.
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