A company has assets with a market value of $100 It has one outstanding bond issue, a zero coupon bond maturing in two years with a face value of $75 The risk free rate is 5 percent The volatility of the asset is 0 30 Determine the market value of the equity and the continuously compounded yield on...

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A company has assets with a market value of $100. It has one outstanding bond issue, a

Question:

A company has assets with a market value of $100. It has one outstanding bond issue, a zero bond maturing in two years with a of $75. The risk-free rate is 5 percent. The volatility of the asset is 0.30. Determine the market value of the equity and the continuously compounded yield on the bond. (Use the spreadsheet Black Scholes Merton Binomial lOe.xlsm for calculations?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...