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Business, 31.12.2020 19:00 naniicapri3

Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $150 million, $135 million, $95 million, or $80 million. These outcomes are all equally likely, and this risk is diversifiable. Gladstone will not make any payouts to investors during the year. Suppose the risk-free interest rate is 5% and assume perfect capital markets. Required:
a. What is the yield-to-maturity of the debt?
b. What is its expected return?

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