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Assume the value of the assets of a firm are $22.503 million and the volatility of the logarithmic returns of the asset is 21.02%. The
- Assume the value of the assets of a firm are $22.503 million and the volatility of the logarithmic returns of the asset is 21.02%. The firm has issued a zero coupon bond with face value 20m dollars due at the end of five years. Assume the riskless five year interest rate is 5% per year continuously compounded. Compute the value of the bond, the credit spread of the bond, and the value of the equity. Show all calculations.
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