Onyx Corporation has a S200, 000 loan that will mature in one year. The riskfree interest rate is 6 percent. The standard deviation in the rate of changein the underlying asset's value is 12 percent, and the leverage ratio for Onyxis 0.8 (80 percent) . The value for N(hl) is 0.02743, and the value for N(h2)is 0.96406. What is the current market value of the loan?
Onyx Corporation has a S200, 000 loan that will mature in one year. The riskfree interest rate is 6 percent. The standard deviation in the rate of changein the underlying asset's value is 12 percent, and the leverage ratio for Onyxis 0.8 (80 percent) . The value for N(hl) is 0.02743, and the value for N(h2)is 0.96406. What is the current market value of the loan?
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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Question
Onyx Corporation has a S200, 000 loan that will mature in one year. The risk
free interest rate is 6 percent. The standard deviation in the rate of change
in the underlying asset's value is 12 percent, and the leverage ratio for Onyx
is 0.8 (80 percent) . The value for N(hl) is 0.02743, and the value for N(h2)
is 0.96406. What is the current market value of the loan?
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