When the firm's assets are worth ________ the required debt payment,the put is ________; the owner of the put option will therefore exercise the option and receive the difference between the required debt payment and the firm's asset value.

Question

Quizplus · Accepted Answer

When the firm's assets are worth less than the required debt payment, the put is in-the-money, as exercising the put option will allow the owner to receive the difference between the required debt payment and the lower asset value.

When the Firm's Assets Are Worth ________ the Required Debt