A firm has a single issue of a zero coupon debt that promises to pay $40 in 5 years, and the A0 = $50, r = 4%, ? = 12%, and ? = 0. If the asset has a 5% chance of total default, what is the value of the debt?

A) $30.83
B) $42.68
C) $55.21
D) $62.41


A

Business

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