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QUESTION
A firm has assets worth $100 millions, and a volatility of 30%. The risk free rate is a constant of 8%.
A firm has assets worth $100 millions, and a volatility of 30%. The risk free rate is a constant of 8%. The firm has an outstanding bond with a 5-year maturity and maturity
value of $50 millions, convertible to 10 million shares. There are also 20 million shares outstanding. What is the value of the bond? The share price?
