Suppose that in July 2009, Google were to issue $96 billion in zero-coupon senior debt, and another
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Suppose that in July 2009, Google were to issue $96 billion in zero-coupon senior debt, and another $32 billion in zero-coupon junior debt, both due in January 2011. Use the option data in the preceding table to determine the rate Google would pay on the junior debt issue. (Assume perfect capital markets.)
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GOOG 422.27 +7.87 Jul 13 2009 @ 13:10 ET Vol 2177516 Open Int Calls Bid Ask 11 Jan 150.0 (OZF AJ) 273.60 276.90 100 11 Jan 160.0 (OZF AL) 264.50 267.20 82 11 Jan 200.0 (OZF AA) 231.20 228.90 172 11 Jan 250.0 (OZF AU) 186.50 188.80 103 11 Jan 280.0 (OZF AX) 162.80 165.00 98 150.10 11 Jan 300.0 (OZF AT) 148.20 408 11 Jan 320.0 (OZF AD) 133.90 135.90 63 11 Jan 340.0 (OZF AI) 120.50 122.60 99 11 Jan 350.0 (OZF AK) 114.10 116.10 269 11 Jan 360.0 (OZF AM) 107.90 110.00 66 11 Jan 380.0 (OZF AZ) 88 95.80 98.00 87.00 11 Jan 400.0 (OZF AU) 85.10 2577 11 Jan 420.0 (OUP AG) 66 74.60 76.90 11 Jan 450.0 (OUP AV) 379 61.80 63.30
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The debt value is 874 billion and the rate is 646 Next we can determine the value of equity Because ...View the full answer
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