A Firm Has Assets of $21

question 14

Multiple Choice

A firm has assets of $21.8 million and a 3-year,zero-coupon,risky bonds with a total face value of $8.5 million.The bonds have a total current market value of $8.1 million.How can the shareholders of this firm change these risky bonds into risk-free bonds?

• A)purchase a call option with a 1-year life and a $8.1 million face value
• B)purchase a call option with a 5-year life and a $8.5 million face value
• C)purchase a put option with a 1-year life and a $21.8 million face value
• D)purchase a put option with a 3-year life and a $8.1 million face value
• E)purchase a put option with a 3-year life and an $8.5 million face value

---

Definitions:

Protective Factors

Elements that enhance one's ability to resist hazards or negative outcomes.

Confidentiality

The ethical principle or legal right that a physician or other professional will hold secret all information relating to a client, unless given permission to do otherwise.

Chronically Ill Students

Chronically ill students are pupils dealing with long-term health conditions that significantly affect their daily lives, schooling, and healthcare needs.

Turnaround Relationship

A relationship that has experienced significant improvement or rehabilitation after facing difficulties or challenges.