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Suppose that a non-dividend paying firm issues a zero-coupon bond maturing in three years. The bond's face value is $100, the current value of the
- Suppose that a non-dividend paying firm issues a zero-coupon bond maturing in three years. The bond's face value is $100, the current value of the assets is $200, the risk-free rate (cc) is 6%, and the volatility of the underlying assets is 25%. Using the BSM model,
- What are the current values of equity and debt?
- What is the bond's implied yield to maturity (in effective annual rate)?
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To calculate the current values of equity and debt using the BlackScholesMerton BSM model we first n...
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Financial Theory and Corporate Policy
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
4th edition
321127218, 978-0321179548, 321179544, 978-0321127211
