Use the Following Information and the Option Valuation Model for the Next

question 97

Multiple Choice

Use the following information and the option valuation model for the next two problems. Onyx Corporation has a $200,000 loan that will mature in one year. The risk free interest rate is 6 percent. The standard deviation in the rate of change in the underlying asset's value is 12 percent, and the leverage ratio for Onyx is 0.8 (80 percent) . The value for N(h1) is 0.02743, and the value for N(h2) is 0.96406. What is the required yield on this risky loan?

• A)6.165 percent.
• B)6.00 percent.
• C)0.165 percent.
• D)5.835 percent.
• E)None of these.

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Definitions:

Product Value

The importance or worth that a product holds for a customer, often determined by its utility, quality, and satisfaction it provides.

Vendor-Managed Inventory

Vendor-Managed Inventory is a supply chain initiative where the supplier assumes the responsibility for managing their products' inventory levels at the customer's premises.

Transportation Costs

Expenses incurred by a company in moving its goods from place to place, including expenses like fuel, labor, and maintenance.

Facility Consideration

Factors that are taken into account when selecting or designing a physical location for operations.