Why is structural approach to modelling risk of default born
Why is structural approach to modelling risk of default born?
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The structural approach was born to modelling risk of default, when the option expired out of the money (that is assets had less value than the debt at maturity) so the firm would have to go bankrupt.
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Great Corporation has the following capital situation. Debt: One thousand bonds were issued five years ago at a coupon rate of 11%. They had 20-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 37% Preferred stock: Two thousand shares of preferred are outstanding,
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the limitation in the process of financial planning
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