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Calculate market value of debt-present value of debt

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The value of a company's equity is $4 million and the volatility of its equity is 60%. The debt that will have to be repaid in two years is $15 million. The risk-free interest rate is 6% per annum.

1) Use Merton's model to estimate the probability of default.

2) Calculate market value of debt, present value of debt, and the expected loss from default

Reference no: EM132645445

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