Trumbull, Inc $\sigma$ ) of Trumbull's Total Value Is 0

question 21

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 ( $\sigma$ ) 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 value (in millions) of Trumbull's equity if it is viewed as an option?

• A) $228.77
• B) $254.19
• C) $282.43
• D) $313.81
• E) $345.19

---

Definitions:

Mediation

A type of intensive negotiation in which disputing parties select a neutral party to help facilitate communication and suggest ways for the parties to solve their dispute.

Early Neutral Case Evaluation

A dispute resolution process where a neutral party assesses the strengths and weaknesses of a case early in litigation to facilitate settlement.

Neutral Third Party

A neutral third party is an independent entity with no stake in the outcome, often involved in mediation or arbitration processes to provide unbiased judgment or facilitate settlements.

Arbitration Clause

A provision in a contract that requires disputes to be resolved through arbitration rather than in court.