A Firm Has One-Year Zero-Coupon Debt with Face Value $7

question 7

Multiple Choice

A firm has one-year zero-coupon debt with face value $7 billion.Assuming the firm value at the end of the year is normally distributed with a mean of 10 billion and a standard deviation of 2 billion,,what is the probability that the firm's assets will not be sufficient to repay the debt at the end of the year?

• A)0.14%
• B)4.44%
• C)5.39%
• D)6.68%

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Definitions:

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Longitudinal Study

A research method that involves observing the same subjects over a period of time, often years or even decades, to track changes or development.

Selective Optimization

A strategy focusing on maximizing performance in key areas through the selection of specific tasks, optimization of resources, and compensation for declines in other domains.

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