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A 7% annual-pay convertible bond is priced at $985. Conversion ratio is 25, and an equivalent option-free bond is priced at $950. Common stock shares

A 7% annual-pay convertible bond is priced at $985. Conversion ratio is 25, and an equivalent option-free bond is priced at $950. Common stock shares trade at $35 and pay a $1 dividend per year. Calculate the following terms:

Straight value

Use a binomial tree to value the (usually) callable bond

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