The EDF Model Uses the Borrower's Current Market Value of Equity

question 42

Multiple Choice

The EDF model uses the borrower's current market value of equity and assets and the option-pricing model to

• A)determine if the equity is mispriced.
• B)calculate the market value of the lender's investment.
• C)assess the implied riskiness of the firm's investments.
• D)estimate the likelihood that the Z-score model is correct.

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