In the Merton model of corporate equity which is based on the Black Scholes formula, what is the quantity (S0/KT)? Assume that interest rates are zero (r=0) so the time value of money can be ignored, therefore S0 = ST. (a) Debt-to-equity ratio. (b) Debt-to-assets ratio. (c) Assets-to-debt ratio. (d) Assets-to-equity ratio. (e) Equity-to-assets rati
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
In the Merton model of corporate equity which is based on the Black Scholes formula, what is the quantity (S0/KT)? Assume that interest rates are zero (r=0) so the
(a) Debt-to-equity ratio.
(b) Debt-to-assets ratio.
(c) Assets-to-debt ratio.
(d) Assets-to-equity ratio.
(e) Equity-to-assets rati
Step by step
Solved in 3 steps
