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Consider a corporation with a market value of $100 million. The form has a zero- coupon...

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Finance

Consider a corporation with a marketvalue of $100 million. The form has a zero- coupon bond with anaggregate Face value of $100 million due in one year. Thevolatility of the rate of return on the firm is 30% per year andthe risk-free rate is 5% per year. What is the aggregate marketvalue of this bond?

A. 79.17 million

B. 69.25 million

C. 98.01 million

D. 85.77 million

E. None of the above

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Transcribed Image Text

Consider a corporation with a marketvalue of $100 million. The form has a zero- coupon bond with anaggregate Face value of $100 million due in one year. Thevolatility of the rate of return on the firm is 30% per year andthe risk-free rate is 5% per year. What is the aggregate marketvalue of this bond?A. 79.17 millionB. 69.25 millionC. 98.01 millionD. 85.77 millionE. None of the above

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