A Firm's Current Value Is $£$ 1 Billion $£$ 06 Billion

question 12

Multiple Choice

A firm's current value is $£$ 1 billion .The firm has one-year zero-coupon debt outstanding with a face value of $£$ 0.6 billion.What is the one-year "distance to default" (in the Moody's KMV approach) if the standard deviation of firm value is 30%?

• A)1.33
• B)1.71
• C)2.34
• D)3.12

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