Exhibit 17.3
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 Exhibit 17.3.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

Quizplus · Accepted Answer

The Answer of Exhibit 17.3
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 Exhibit 17.3.What is the yield on Wilson Dover's debt?
A)6.04%
B)6.36%
C)6.70%
D)7.05%
E)7.42%

Exhibit 17.3 The Total Value (Debt Plus Equity) of Wilson Dover Inc