In the Merton $(1974)$ structural model of corporate debt, how are the firm's equity and debt interpreted in terms of option positions?

Group of answer choices

Equity is equivalent to a risk$-$free bond plus a put option on the firm's assets, while debt is equivalent to a call option on the firm's assets.

Equity is equivalent to a put option on the firm$$s assets, while debt is equivalent to a risk$-$free bond plus a call option on the firm's assets.

Both equity and debt are equivalent to call options on the firm$$s assets but with different strike prices.

Equity is equivalent to a call option on the firm$$s assets, while debt is equivalent to a risk$-$free bond minus a put option on the firm's assets.