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The answer is C, wanna know how.. Goggles Co. issued 2 different zero-coupon bonds. Bond A is a junior bond with face value $153 million
The answer is C, wanna know how..
Goggles Co. issued 2 different zero-coupon bonds. Bond A is a junior bond with face value $153 million while Bond B is a senior bond with face value $200 million. The maturity of the debt is 1 year from now. In one year the company can be in a good state and have an asset value of $500 million, or the company can be in a bad state and have assets worth only $200 million. The two states can occur with equal probability. In case of bankruptcy, the bankruptcy costs are $20 million. The market risk premium is 5.00% and the risk-free rate is 3.00% and both bonds bear no systematic risk What is the market value of debt? A. $266.5 million B. $268.4 million C. $258.7 million D. $241.3 million E. I choose not to answer Goggles Co. issued 2 different zero-coupon bonds. Bond A is a junior bond with face value $153 million while Bond B is a senior bond with face value $200 million. The maturity of the debt is 1 year from now. In one year the company can be in a good state and have an asset value of $500 million, or the company can be in a bad state and have assets worth only $200 million. The two states can occur with equal probability. In case of bankruptcy, the bankruptcy costs are $20 million. The market risk premium is 5.00% and the risk-free rate is 3.00% and both bonds bear no systematic risk What is the market value of debt? A. $266.5 million B. $268.4 million C. $258.7 million D. $241.3 million E. I choose not toStep by Step Solution
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