XYZ Corporation is the borrower and has total assets worth $89MM today. Research has shown that the
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XYZ Corporation is the borrower and has total assets worth $89MM today. Research has shown that the standard deviation of the rate of return on these assets is 50% (0.5) per year. XYZ issued a series of one and a half year zero-coupon bonds with total face value of $90MM. Of the total bond issue, senior debt accounted for $40MM in face value while $50MM in face value of the bonds are junior debt. The firm has 100,000 shares of stock outstanding. In one year, XYZ is expected to issue a riskless dividend of $50 per share to its equity holders. The risk-free interest rate is currently 9% per year.
What is the value of the jr. debt of the firm?
Related Book For
Elementary Statistics A step by step approach
ISBN: 978-0073386102
8th edition
Authors: Allan Bluman
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