Suppose that a non-dividend paying firm issues a zero-coupon bond maturing in three years. The bond's face
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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 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)?
Related Book For
Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
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