1. Suppose that a non-dividend paying firm issues a zero-coupon bond maturing in three years. The bond's face value is $100, the current value of the assets is $200, the risk-free rate (cc) is 6%, and the volatility of the underlying assets is 25%. Using the BSM model,
2. What are the current values of equity and debt?
3. What is the bond's implied yield to maturity (in effective annual rate)?

Answer rating: 100% (QA)

To calculate the current values of equity and debt using the BlackScholesMerton BSM model we first n... View the full answer