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ruddy robles
on Dec 08, 2024

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The assets of Bill's Boats are currently worth $47,600. These assets are expected to be worth either $45,000 or $53,000 one year from now. The company has a pure discount bond outstanding with a $50,000 face value and a maturity date of one year. The risk-free rate is 4 percent. What is the value of the equity in this firm? (Round your answer to the nearest whole dollar.)

A) $767
B) $948
C) $1,624
D) $2,120
E) $2,419

Pure Discount Bond

A type of bond that is issued at a discount to its face value, pays no interest, and is redeemed at its face value at maturity.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk of financial loss, typically represented by the yield on government bonds.

Equity

The ownership interest in a company, represented by the amount of money that would be returned to shareholders after paying off all liabilities.

  • Calculate the value of equity in a firm based on its assets and liabilities.
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Brionna DanielDec 09, 2024
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