Wilson Dover Inc.
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 (?) of Wilson Dover's total value is 0.60, and the risk-free rate is 5%. Assume that N(d1) = 0.9720 and N(d2) = 0.9050.
?
Refer to the data for Wilson Dover Inc. What is the yield on Wilson Dover's debt?
A. 6.04%
B. 6.36%
C. 6.70%
D. 7.05%
E. 7.42%
Answer: E
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