Please show work. Thank you You know that the assets of a firm BIG are...
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Accounting
Please show work. Thank you
You know that the assets of a firm BIG are today worth 100mil. You reasonably feel that in a year they will be either worth 110mil or 90mil. You also know that a riskless zero coupon bond maturing in one year is offering today a yield of 5%. The firm has issued a zero-coupon bond that matures in one year and has a face value of 100mil.
- What should be the value of this corporate bond today?
- What should be its yield to maturity?
- What should be the value of the equity of the firm?
- Can you do a further analysis of this problem?
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