Did i read the questions incorrectly to assume the “premium over BV was refering to Ending BV x (Premium) ; Premium = (1+.20)
Thanks!作者: sdada 时间: 2013-4-28 12:01
Key here is Finite horizon ri model
it assumes that the terminal value is a premium over book value. The premium is (Pt - Bt); Pt being the price at time T, since the problem already says that the premium is 20% of BookV at time T, then it means Pt-Bt = 0.2*Bt作者: yodacaia 时间: 2013-4-28 12:01
Thank you kindly!作者: defour44 时间: 2013-4-28 12:01
and the 20.14 Book value is discounted above in the table to get the value of 2.51 …
