Using the Binomial Model, find the values of a firm's levered equity (EL), and the expected return on the equity, rLE, given the following values: V=100, u=1.3, d=1/u, p=0.7, rf=5%, X=100, and T=3
EL rLE
a. 32.34 6.92%
b. 32.34 10.74%
c. 18.96 6.92%
d. 18.96 10.74%
FORMULAS: ; EL = ;
;
D
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