James,Inc.has zero-coupon outstanding debt maturing in 8 years.In rank of seniority,each pays at maturity $20 million,$15 million,and $40 million.Assume asset value = $60 million,r = 0.05,σ = 0.28,and no dividend is paid.What is the yield on the $15 million subordinate debt?
A) 5.72%
B) 6.72%
C) 7.72%
D) 8.72%
Correct Answer:
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