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A Firm's Current Value Is $10 Billion

Question 3

Multiple Choice

A firm's current value is $10 billion.The firm has one-year zero-coupon debt with face value $7 billion.The standard deviation of firm asset value is $2 billion.What is the firm's "distance-to-default" as measured by the Moody's KMV approach?


A) 1.50
B) 2.00
C) 3.00
D) 7.00

Correct Answer:

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