Question: I need help calculating formula using Merton 1974. Use the Merton (1974) model to solve the probability of default for an issuer that has: Current

I need help calculating formula using Merton 1974.

  1. Use the Merton (1974) model to solve the probability of default for an issuer that has: Current assets value = $20M
  2. Outstanding debt at maturity = $22M
  3. There are 4 more months until debt maturity (i.e. 1/3 of a year)
  4. Risk free interest rate = 5%
  5. Assets volatility (standard deviation) = 50% per annum

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