What Is the Key Problem with the Structural Model

question 2

Multiple Choice

What is the key problem with the structural model?

• A) It assumes a simple liability structure for the firm's balance sheet.
• B) It assumes the assets of the firm trade in frictionless and competitive markets.
• C) It assumes interest rates are constant.
• D) It assumes a lognormal distribution for asset returns.
• E) It assumes the equity pays no dividends.

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