As of July 2009, Google (ticker: GOOG) had no debt. Suppose the firm were to issue $96 billion in zero-coupon senior debt, and another $26 billion in zero-coupon junior debt, both due in January 2011. Suppose Google had 320 million shares outstanding, trading at $422.27 per share, implying a market value of $135.1 billion. The risk-free rate over this horizon is 1.0%.

Use the option data in the Table to determine the rate Google would pay on the junior debt issue. (Assume perfect capital markets.)

\fUnit V Assessment-Kayla Hauge Student: Kayla Hauge Submitted: 12/20/16 10:12am Page 1 of 1 Instructor: Dee Wessler, Chris Marsh, Brent Hatcher, Jennifer Byrom, Dee Wessler, Mustafa Sayim, Faculty Services, Dawn Dunson Course: MBA6081-14I-5 Assignment: Unit V Assessment 14. As of July 2009, Google (ticker: GOOG) had no debt. Suppose the firm were to issue $96 billion in zero-coupon senior debt, and another $26 billion in zero-coupon junior debt, both due in January 2011. Suppose Google had 320 million shares outstanding, trading at $422.27 per share, implying a market value of $135.1 billion. The risk-free rate over this horizon is 1.0%. Use the option data in the Table 1 to determine the rate Google would pay on the junior debt issue. (Assume perfect capital markets.) Review Only Click the icon to see the Worked Solution (Formula Solution). The rate Google would pay on the junior debt issue is 34.4 %. (Round to one decimal place.) 1: Data Table GOOG Jul 13 2009 @ 13:10 ET Calls 11 Jan 150.0 (OZF AJ) 422.27 Bid 11 Jan 160.0 (OZF AL) 11 Jan 200.0 (OZF AA) 273.6 264.5 228.9 Vol Ask 276.9 267.2 231.2 +7.87 2177516 Open Int. 100 82 172 11 Jan 250.0 (OZF AU) 186.5 188.8 103 11 Jan 300.0 (OZF AT) 148.2 150.1 408 122.6 99 11 Jan 280.0 (OZF AX) 162.8 165 11 Jan 320.0 (OZF AD) 133.9 135.9 11 Jan 350.0 (OZF AK) 114.1 116.1 11 Jan 340.0 (OZF AI) 120.5 11 Jan 360.0 (OZF AM) 107.9 11 Jan 400.0 (OZF AU) 85.1 11 Jan 450.0 (OUP AV) 61.8 11 Jan 380.0 (OZF AZ) 11 Jan 420.0 (OUP AG) 95.8 74.6 110 98 98 63 269 66 88 87 2577 63.3 379 76.9 66 YOU ANSWERED: 2.38 https://xlitemprod.pearsoncmg.com/api/v1/print/en-us/finance 12/20/2016