Robert Bosch GmbH is a privately held firm. As an analyst trying to determine the value of
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Question:
a) Calculate u and d. Note that the volatility is annual but the binomial period lasts for two years.
b) Calculate the risk-neutral probabilities. Note that the interest rate is quoted per annum but the binomial period lasts for two years.
c) Calculate the value of the short put option.
d) Calculate the market value of debt as the difference between the (discounted) debt face value and the value of the short put.
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
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