A firm can be worth $60 or $195 with equal probability. The firm's debt consists of a zero -coupon bond with a face value of $245 that matures at the end of one year. Assume risk neutrality and a cost of capital of 9%. What will the bondholders pay for this debt? 109 83 100 O 92
A firm can be worth $60 or $195 with equal probability. The firm's debt consists of a zero -coupon bond with a face value of $245 that matures at the end of one year. Assume risk neutrality and a cost of capital of 9%. What will the bondholders pay for this debt? 109 83 100 O 92
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A firm can be worth $60 or $195 with equal
probability. The firm's debt consists of a zero-coupon
bond with a face value of $245 that matures at the
end of one year. Assume risk neutrality and a cost of
capital of 9%. What will the bondholders pay for this
debt?
O 109
O 83
100
O 92
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