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Suppose a company has the chance to make a risky investment. If the new project is successful, the price of the stock will jump from
Suppose a company has the chance to make a risky investment. If the new project is successful, the price of the stock will jump from $50 to $100, but the value of bonds will remain $1,000 per bond. The company will be worthless and go bankrupt if the investment is unsuccessful. The probability of success is 50% and the probability of failure is 50%. What is the expected percentage gain on bond and stock? 10%;10% 30%;30% 50%;50% 20%;20%
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