Question
In: Finance
Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $48,000 that...
Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $48,000 that matures in one year. The current market value of the firm’s assets is $51,600. The standard deviation of the return on the firm’s assets is 38 percent per year, and the annual risk-free rate is 6 percent per year, compounded continuously.
a. Based on the Black–Scholes model, what is the market value of the firm’s equity and debt? Market value Equity $ 10923.19; Debt $ 40676.81
b. What is the firm’s continuously compounded cost of debt? (Do
not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.).
Cost of debt %
I already got part a (and it's correct), I jus need part b.
Solutions
jeff jeffy answered 8 months agoRelated Solutions
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