Trumbull, Inc

question 16

Multiple Choice

Trumbull, Inc., has total value (debt plus equity) of $500 million and $200 million face value of 1-year zero coupon debt. The volatility of Trumbull's total value is 0.60, and the risk-free rate is 5%. Assume that N(d1) = 0.9720 and N(d2) = 0.9050.
-What is the yield on Trumbull's debt?

• A) 6.04%
• B) 6.36%
• C) 6.70%
• D) 7.05%
• E) 7.42%

---

Definitions:

Demand For Labor

The total amount of workers that employers are willing and able to hire at a given wage rate in the labor market.

Variable Inputs

Factors of production that can be adjusted in the short term to change the level of output, such as labor or raw materials.

Production Process

The sequence of steps or operations involved in the production and manufacture of goods or services, transforming inputs into finished products.

Supply Of Labor

The total hours that workers are willing and able to work at a given wage rate.