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777dan777 [17]
3 years ago
14

Wilson Dover Inc. The total value (debt plus equity) of Wilson Dover Inc. is $500 million and the face value of its 1-year coupo

n debt is $200 million. The volatility (σ) of Wilson Dover's total value is 0.60, and the risk-free rate is 5%. Assume that N(d1) = 0.9720 and N(d2) = 0.9050. Refer to the data for Wilson Dover Inc. What is the yield on Wilson Dover's debt? a. 7.05% b. 6.04% c. 6.70% d. 7.42% e. 6.36%
Business
1 answer:
Nutka1998 [239]3 years ago
6 0

Answer:

7.42%

Explanation:

Value = 500 million

Amount of debt = 200 million

Time = year

Volatility = 6%

Risk free rate = 0.05

Nd1 = 0.9720

Nd2 = 0.9050

We have to calculate the value =

500 - (500 x 0.9720 - 200 x e^-0.05 x 0.9050)

= 186.17 million

We now calculate the yield

(200/186.17)^1 - 1

= 0.0742

= 7.42%

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I hope my answer helps you.

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How long does it take to become a​ millionaire? A ​$500,000 investment will hit​ $1 million in 39 years at an annual interest ra
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Answer:

It will take 30.10 year

Explanation:

We have given initial investment $500000

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We have to find the time taken to reach the amount $1000000

We know that future value is equal to A=P(!+\frac{r}{100})^n

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Taking log both side

log2=nlog1.0179

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When a person is authorized by the principal to transact all affairs in connection with a particular type of business or trade o
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Answer:

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