Consider an 8% (coupon rate) convertible bond that has $100 face value, 4 years to maturity, conversion ratio = 25, and pays interest annually. The market perceives that 4 years from now the shares of the firm are equally likely to be worth $3 and $7. The term structure is assumed to be flat at 9%. Assume that investors delay conversion until after they receive their last coupon. What is the fair price for this convertible bond?

Group of answer choices

A.123.33

B. 149.89

C. 96.76

D. None is correct