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A company's debt is given by a bond that will mature in two years. After two years the company will terminate all activity. The company
A company's debt is given by a bond that will mature in two years. After two years the company will terminate all activity. The company unlevered equity value in two years can be $ millions with a probability, or $ millions with probability The bond is a zerocoupon bond with face value $ millions. The market risk premium is the riskfree rate is The bankruptcy costs are $ millions. The market price of the bond is of the face value. Assume perfect capital markets and no taxation. What is the beta of the company's debt? the answer is
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