medium · Private Credit & Debt underwriting-credit-analysis
Using the Merton model, if a firm has an asset value (V₀) of $200 million, a debt face value (D) of $120 million, asset volatility (σ_V) of 25%, and a risk-free rate (r) of 4% over 5 years, what is the approximate credit spread in basis points?
- 22 bps
- 184 bps
- 76 bps
- 134 bps
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