The value of assets amounts to 1,700,000 €, the expected instantaneous rate of return and corresponding volatility are 8 and 13 percent. Time to maturity of the outstanding debt is 1 year. Investors expect a payoff of equity at the level of 640,963.47 €. Calculate the face value of debt given d1 tilde 3.36 in the framework of Merton's model.

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To calculate the face value of debt using Mertons model we can use the formula D A1 ... View the full answer