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

question 18

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 debt if its equity is viewed as an option?

• A) $167.57
• B) $186.19
• C) $204.81
• D) $225.29
• E) $247.82

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