Question: Credit risk measures using the structural model: assume a company has the following characteristics. Time t value of the firms assets: At = $3,000 Expected

  1. Credit risk measures using the structural model: assume a company has the following characteristics. Time t value of the firms assets: At = $3,000 Expected return on assets: u = 0.05 per year Risk-free rate: r = 0.02 per year Face value of the firms debt: K = $2,000 Time to maturity of the debt (tenor): T t = 1 year Asset return volatility: = 0.35 per year What is the present value of the expected loss? (Select the answer that most closely matches the results of your calculations.)

    A.

    $40.591
    B.

    $45.591
    C.

    $48.985

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