(i) Suppose that in July 2009, Google were to issue $96
billion in zero-coupon senior debt, and another $26 billion in zero-coupon
junior debt, both due in January 2011. Use the option data in the preceding
table to determine the rate Google would pay on the junior debt issue. (Assume
perfect capital markets.)
(ii) Using the information in Problem 1, use the Binomial
Model to calculate the price of a oneyear put option on Estelle stock with a
strike price of $25.
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