Question: Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the

Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the firm's assets is $10,600. The standard deviation of the return on the firm's assets is 32 percent per year, and the annual risk-free rate is 7 percent per year, compounded continuously. What are the market values of the firm's equity and debt based on the Black-Scholes model? Use "risk-free bond - put option" to find out the value of debt. Only handwritten submission is accepted. Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the firm's assets is $10,600. The standard deviation of the return on the firm's assets is 32 percent per year, and the annual risk-free rate is 7 percent per year, compounded continuously. What are the market values of the firm's equity and debt based on the Black-Scholes model? Use "risk-free bond - put option" to find out the value of debt. Only handwritten submission is accepted
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