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Use the option data from the table to determine the
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# Question : Use the option data from the table to determine the : 6345

Use the option data from the table to determine the rate Google would have paid if it had issued \$119.54 billion in zero-coupon debt due in January 2011. Suppose Google currently had 314.57 million shares outstanding, implying a market value of \$131.51 billion. Risk-free rate is 1.20% (Assume perfect capital markets.)

What is the yield on the Google debt in percent?

What percent is the credit spread Google would have to pay?

GOOG 418.91 7.87 Jul 13 2009 13:10EST Vol 2177516 Calls Ask Open Int 11 Jan 150.0 (OZF AJ) 273.60 276.90 100 267.520 11 Jan 160.0 (OZF AL) 264.50 82 228.90 11 Jan 200.0 (OZF AA) 231.20 172 186.50 11 Jan 250.00 (OZF AU) 188.80 103 162.80 11 Jan 280.0 (OZFAX) 165.00 98 148.20 150.10 11 Jan 300.0 (OZF AT) 408 133.90 135.90 11 Jan 320.0 (OZF AD) 63 120.50 122.60 11 Jan 340.0 (OZF AI) 99 11 Jan 350.0 (OZF AK) 114.10 116.10 269 107.90 11 Jan 360.0 (OZF AM) 110.00 11 Jan 380.0 (OZF AZ) 95.80 98.00 88 11 Jan 400.0 (OZF AU) 85.10 87.00 2577 74.60 76.90 11 Jan 420.0 (OZF AG) 63.30 11 Jan 450.0 (OZF AV) 61.80 379 Given the CBOE call option quotes for Google stock, we can calculate the implied debt yield given perfect markets if Google were to borrow by issuing 18-month, zero coupon bonds

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