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A Firm Has One-Year Zero-Coupon Debt with Face Value $7

Question 7

Multiple Choice

A firm has one-year zero-coupon debt with face value $7 billion.Assuming the firm value at the end of the year is normally distributed with a mean of 10 billion and a standard deviation of 2 billion,,what is the probability that the firm's assets will not be sufficient to repay the debt at the end of the year?


A) 0.14%
B) 4.44%
C) 5.39%
D) 6.68%

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