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Identify the parameters of the model

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A company has a single zero coupon bond outstanding which matures in 10 years with a market value of $25m. The current value of the company's assets is $21m, and the standard deviation of the return on the firm's assets is 47 percent per year. The risk free rate is 6 percent per year, compounded continuously.

1) Use the Black-Scholes model to determine the value of the company's equity. {Hint: You may use the option calculator your team developed in this course. Clearly identify the parameters of the model. Certain parameters are keys to the problem and thus carry significantly higher weights than others.}

Reference no: EM131492836

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