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QUESTION
Firm X has $25 million of risk-free debt outstanding. This debt has an annual coupon rate of 6% and matures in 2 years. Coupons are paid once per year. The current term structure is flat at 10% per
Firm X has $25 million of risk-free debt outstanding. This debt has an annual coupon rate of 6% and matures in 2 years. Coupons are paid once per year. The current term structure is flat at 10% per year, compounded annually.
What is the current market value of the firm’s debt?
