Use the Information for the Question(s)below

question 10

Multiple Choice

Use the information for the question(s) below.
Monsters Incorporated (MI) is ready to launch a new product.Depending upon the success of this product,MI will have a value of either $100 million,$150 million,or $191 million,with each outcome being equally likely.The cash flows are unrelated to the state of the economy (i.e.risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate,which is currently 5%.Assume that the capital markets are perfect.
-Suppose that MI has zero-coupon debt with a $125 million face value due next year.The yield to maturity of MI's debt is closest to:

• A)12.5%.
• B)7.8%.
• C)25.0%.
• D)5.0%.

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Definitions:

Impersonal Audience

A broad, undifferentiated group of people to whom communication is directed, without a personal connection or identification.

Information

Data that has been processed or presented in a format that is understandable and useful to the recipient.

Interacting

The act of communicating or engaging in action with others, often leading to an exchange of information or influence.

Media

Communication channels through which news, entertainment, education, data, or promotional messages are disseminated.