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What is the market value of the firm debt for buffalo corp

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Problem 1: Buffalo Corp. has a zero coupon bond issue outstanding with a face value of $15,000 that matures in one year. The current market value of the firm's assets is $16,900. The standard deviation of the return on the firm's assets is 53 percent per year and the annual risk-free rate is 5 percent per year, compounded continuously. Based on the Black-Scholes model, what is the market value of the firm's debt?

Option 1: $12,167

Option 2: $13,167

Option 3: $15,167

Option 4: $11,167

Option 5: $14,167

Reference no: EM132970359

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