AoB [4]

AOB, Inc., has issued 2 shares of common stock and 1 convertible bond. AOB is valued at V = 100. Tomorrows value, V, will be either 150 or 50, with equal chance.

The bond has a face value of $30 and carries a coupon of 10%. The conversion ratio is 1:1. The bond is due tomorrow. The risk free rate is 10%. Value the bond.