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In: Finance

A bank sith seniority in the amount of $250, senior bond holders in the amount of...

A bank sith seniority in the amount of $250, senior bond holders in the amount of $160, and a steel trade creditor with no prioritt in the amount of $45.

Plan A: 80% chance the value of the firm = $780
20% chance the value of the firm = $100

Plan B: 50% chance of the value of the firm = $370
50% chance of the value of tbe firm =210

what is the expected value of Plan A to the bank?

Solutions

Expert Solution

Expected value of the plan will be sum of all the probabilities after weighting it out.

Expected value of plan A= (780*80%)+(100*20%)

= (624+20)

= $ 644

jeff jeffy answered 2 years ago
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