A Firm Has Assets of $16

question 26

Multiple Choice

A firm has assets of $16.4 million and 2-year, zero-coupon, risky bonds with a total face value of $7.4 million. The bonds have a total current market value of $7.1 million. The shareholders of this firm can change these risky bonds into risk-free bonds by purchasing a ________ option with a 2-year life and a strike price of ________ million.

• A) call; $7.1
• B) call; $7.4
• C) put; $16.4
• D) put; $7.1
• E) put; $7.4

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Definitions:

Water Bath

A laboratory equipment used to maintain water at a constant temperature for the purpose of heating substances evenly.

Laboratory

A room or building equipped for scientific experiments, research, or teaching, or for the manufacture of drugs or chemicals.

Laboratory Safety

Practices and procedures designed to minimize risks and hazards within laboratory environments.

Eating

The act of consuming food to supply the body with nutrients and energy.