The current market value of the assets of Smethwell, Inc. is $54 million, with a standard deviation of 16 percent per year. The firm has zero-coupon bonds outstanding with a total face value of $40 million. These bonds mature in 2 years. The risk-free rate is 4 percent per year compounded continuously. What is the value of d1?
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69.
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The current market value of the assets of Cristopherson Supply is $46.5 million. The market value of the equity is $28.7 million. The risk-free rate is 4.75 percent and the outstanding debt matures in 4 years. What is the market value of the firm's debt?
Market value of debt = $46.5m - $28.7m = $17.8m
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70.
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The current market value of the assets of Nano Tek is $19.5 million. The market value of the equity is $7.5 million. The risk-free rate is 4.5 percent and the outstanding debt matures in 5 years. What is the market value of the firm's debt?
Market value of debt = $19.5m - $7.5m = $12m
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71.
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You need $12,000 in 6 years. How much will you need to deposit today if you can earn 11 percent per year, compounded continuously? Assume this is the only deposit you make.
PV = $12,000 × e-0.11(6) = $6,202.22
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