4. Suppose a firm with a value of $100 million has a bond outstanding with a face value of $60 million that matures in 8 years. the current interest rate is 9% and the volatility of the firm is 20% what is the probability that the firm will default on its debt if the expected return on the firm, u, is 10% ?what is the value of LGD *

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4. Suppose a firm with a value of $100
million has a bond outstanding with a face
value of $60 million that matures in 8
years. the current interest rate is 9% and
the volatility of the firm is 20% what is the
probability that the firm will default on its
debt if the expected return on the firm, u,
is 10% ?what is the value of
LGD
Transcribed Image Text:4. Suppose a firm with a value of $100 million has a bond outstanding with a face value of $60 million that matures in 8 years. the current interest rate is 9% and the volatility of the firm is 20% what is the probability that the firm will default on its debt if the expected return on the firm, u, is 10% ?what is the value of LGD
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