Ed's Sheds Has a $1,250 Pure Discount Bond That Comes

Ed's Sheds has a $1,250 pure discount bond that comes due in 1 year.The risk-free rate of return is 3.1 percent.The firm's assets are expected to be worth either $1,100 or $1,500 in 1 year.Currently,these assets are worth $1,360.What is the current value of the firm's debt?

A) $1,287.48
B) $1,293.85
C) $1,212.52
D) $1,153.85
E) $1,176.83

Correct Answer:

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