Consider a two-date binomial model. A company has both debt and equity in its capital structure.

5. [20pts) Consider a two-date binomial model. A company has both debt and equity in its capital structure. The value of the company is 100 at Date 0. At Date 1, it is equally like that the value of the company increases by 20% or decreases by 10%. The total promised amount to the My; is 100 at Date 1. The Winterest rate is 10%. [a] What are the possible payoffs to the mm at date 1? What kind of nancial product has the same payoffs? Please describe the detailed characteristics of the nancial product. [b] What are the possible payoffs to the bondholders at date 1? Are they W What kind of nancial product/portfolio has the same payoffs? Please describe the detailed characteristics of the nancial productfportfolio. [c] What is the value of the debt at Date 0? What is the value of the equity at Date 0? [d] Suppose the government announces that it guarantees the company's payment to the W5, How much is the government guarantee worth? (e) Now we extend the model to a three-date setting. At both Date 1 and Date 2, it is equally likely that the value of the company increases by 20% or decreases by 10%, as depicted in the graph below. Suppose there is an American put option written on the entire rm with strike price 100. What is the value of this American put at Date 0