A Firm's Current Value Is $10 Billion

question 18

Multiple Choice

A firm's current value is $10 billion. The firm has one-year zero-coupon debt with face value $7 billion. The standard deviation of firm asset value is $2 billion. What is the firm's "distance-to-default" as measured by the Moody's KMV approach?

• A) 1.50
• B) 2.00
• C) 3.00
• D) 7.00

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