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A firm can be worth $90 or $310 with equal probability. The firm?s debt consists of...

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Finance

A firm can be worth $90 or $310 with equal probability. Thefirm?s debt consists of a zero -coupon bond with a face value of$180 that matures at the end of one year. Assume risk neutralityand a cost of capital of 11%. What will the bondholders pay forthis debt? 143 200 162 180

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Zero Coupon Bonds are those bonds on which investors are notpaid any interest but are entitled only torepayment of principal sum on the maturity period    See Answer
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Transcribed Image Text

A firm can be worth $90 or $310 with equal probability. Thefirm?s debt consists of a zero -coupon bond with a face value of$180 that matures at the end of one year. Assume risk neutralityand a cost of capital of 11%. What will the bondholders pay forthis debt? 143 200 162 180

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