Question: A firm issues a two-year bond with face value 800 at time 0. The bond value does not change until the maturity date. The total

A firm issues a two-year bond with face value 800 at time 0. The bond value does not change until the maturity date. The total assets value at time 0 is 1,000 and the assets value volatility is 0.4. Interest rate is 0.1. Using Merton model to estimate:

1) The distance to default of this firm at the maturity date

2) The probability of default at the maturity date

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