C Company’s risk-free interest rate is 6 percent. The standard deviation in the rate of change in the underlying asset's value is percent, and the leverage ratio of C Company is 0.9. C Company has a $350,000 loan that will mature in one year. The value for N(h1) is 0.028, and the value for N(h2) is 0.94.

ALL I NEED ARE PARTS B AND C, WHICH ARE NOT CALCULATIONS

1. What is the current market value of the loan?

b. Briefly discuss what this loan value represents?

c. What is the importance of default risk to loan, give an example.

Answer rating: 100% (QA)

You have specifically asked answers for part b and c Part b Asset Equity Debt Hence Equity Asset Deb... View the full answer