Use the Information for the Question(s)below

question 10

Multiple Choice

Use the information for the question(s) below.
Monsters Incorporated (MI) is ready to launch a new product.Depending upon the success of this product,MI will have a value of either $100 million,$150 million,or $191 million,with each outcome being equally likely.The cash flows are unrelated to the state of the economy (i.e.risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate,which is currently 5%.Assume that the capital markets are perfect.
-Suppose that MI has zero-coupon debt with a $125 million face value due next year.The yield to maturity of MI's debt is closest to:

• A)12.5%.
• B)7.8%.
• C)25.0%.
• D)5.0%.

---

Definitions:

Prejudice

Negative attitude held by a person about the members of a particular social group.

Discrimination

Treating people differently because of prejudice toward the social group to which they belong.

Nonconformity

Nonconformity refers to the refusal to align with the established or expected norms, rules, or laws of a group or society.

Situational Attribution

The process of attributing a person's behavior to external or situational factors rather than to internal characteristics.