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Handler Corp. has a zero coupon bond that matures in five years with a face value of $91,000. The current value of the companys assets
Handler Corp. has a zero coupon bond that matures in five years with a face value of $91,000. The current value of the companys assets is $87,000 and the standard deviation of its return on assets is 38 percent per year. The risk-free rate is 6 percent per year, compounded continuously. |
d-1. | Assume the company can restructure its assets so that the standard deviation of its return on assets increases to 47 percent per year. What is the new value of the debt? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
d-2. | What is the new continuously compounded yield on the debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
e-1. | If the company restructures its assets, how much will bondholders gain or lose? (A loss should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
e-2. | If the company restructures its assets, how how much will stockholders gain or lose? (A loss should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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Note*** I already have the first four answers from a-c2. I am posting this question because I need the rest of the answers d1-e2 (4 sub parts) Please only attmept this question if you know you can get it right.
Thanks!!!
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