Wilson Dover Inc.
The total value (debt plus equity) of Wilson Dover Inc.is $500 million and the face value of its 1-year coupon 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(d 1 ) = 0.9720 and N(d 2 ) = 0.9050.

-Refer to the data for Wilson Dover Inc.What is the yield on Wilson Dover's debt?
A) 6.04%
B) 6.36%
C) 6.70%
D) 7.05%
E) 7.42%

Question

Wilson Dover Inc.
The total value (debt plus equity) of Wilson Dover Inc.is $500 million and the face value of its 1-year coupon 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(d 1 ) = 0.9720 and N(d 2 ) = 0.9050.
​
-Refer to the data for Wilson Dover Inc.What is the yield on Wilson Dover's debt?
A) 6.04%
B) 6.36%
C) 6.70%
D) 7.05%
E) 7.42%

Quizplus · Accepted Answer

The Answer of Wilson Dover Inc.
The total value (debt plus equity) of Wilson Dover Inc.is $500 million and the face value of its 1-year coupon 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(d 1 ) = 0.9720 and N(d 2 ) = 0.9050.
​
-Refer to the data for Wilson Dover Inc.What is the yield on Wilson Dover's debt?
A) 6.04%
B) 6.36%
C) 6.70%
D) 7.05%
E) 7.42%

Wilson Dover Inc. The Total Value (Debt Plus Equity) of Wilson Dover Inc.is