PG Enterprises (PGE), currently has assets with a market value of $100.Next year the market value of PGE's assets is going to increase by 10% or decrease by 40% dependingon the state of the economy. The annual risk-free rate of interest is 0%. PGE has one share of commonstock issued and outstanding as well as one zero coupon corporate bond outstanding with a face value of$100 maturing next year at t = 1. The corporate bond has no callable, puttable or convertible features.

(a) Find today's value of PGE's corporate bond and common stock. What is the promisedyield to maturity of the corporate bond equal to?