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The assets of JKL Corp. are currently worth $300. These assets are expected to be worth either $564.67 or $159.39 one year from now. The
The assets of JKL Corp. are currently worth $300. These assets are expected to be worth either $564.67 or $159.39 one year from now. The company has a pure discount bond outstanding with a $250 face value and a maturity date of one year. The risk-free rate is 0.7%. What is the market value of the debt in this firm today? (hint: you need to value the equity as a call option to value the debt).
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