Question: Repeat the previous problem for debt instead of equity. Suppose there is a single 5-year zero-coupon debt issue with a maturity value of $120. The

Repeat the previous problem for debt instead of equity.
Suppose there is a single 5-year zero-coupon debt issue with a value of $120. The on assets is 12%. What is the on equity? The volatility of equity? What happens to the on equity as you vary A, σ, and r?

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D 100 346653 65335 r A 10 and from problem 164 r E 123 0123 r D 878 Since D A E the volatility ... View full answer

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