Question
A firm has 65% probability of being worth $100 million and a 35% probability of being worth $130 million. There is one bond outstanding that
A firm has 65% probability of being worth $100 million and a 35% probability of being worth $130 million. There is one bond outstanding that promises to pay $100 million at an interest rate of 7%. The cost of capital for the firms projects is 9%. What is the current value of the firms debt?
Group of answer choices
91.7
93.5
none are correct
100.0
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett, Otgo Erhemjamts
11th Edition
1264413041, 9781264413041
