The Current Market Value of the Assets of Smethwell,Inc

Multiple Choice

The current market value of the assets of Smethwell,Inc.is $54 million,with a standard deviation of 16 percent per year.The firm has zero-coupon bonds outstanding with a total face value of $40 million.These bonds mature in 2 years.The risk-free rate is 4 percent per year compounded continuously.What is the value of d1?

A) 1.32
B) 1.48
C) 1.67
D) 1.79
E) 2.06