Wesley Corp. stock is trading for $27 per share. Wesley has 20 million shares outstanding and a market debt-equity ratio

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Wesley Corp. stock is trading for $27 per share. Wesley has 20
million shares outstanding and a market debt-equity ratio of 0.5.
Wesley’s debt is zero-coupon debt with a 5-year maturity and a
yield to maturity of 10%.
a. Which of the following best describes Wesley's debt using a
put option?
Short $270 million in risk free debt and Long a put option on
the firm's assets with a $270 strike price.
Short $810 million in risk free debt and Long a put option on
the firm's assets with a $270 strike price.
Long $270 million in risk free debt and Short a put option on
the firm's assets with a $270 strike price.
Long $810 million in risk free debt and Short a put option on
the firm's assets with a $810 strike price.
Short $270 million in risk free debt and Long a put option on
the firm's assets with a $810 strike price.
b. Which of the following best describes Wesley's debt using a
call option?
Short $270 million in the firm's assets and Long a call option
with a $270 strike price.
Short $270 million in the firm's assets and Long a call option
with a $810 strike price.
Long $810 million in the firm's assets and Short a call option
with a $270 strike price.
Short $810 million in the firm's assets and Long a call option
with a $270 strike price.
Long $810 million in the firm's assets and Short a call option
with a $810 strike price.