Can you please explain how and why the conversion value would be $0\mathrm{.}25?$ Goldenbust corporation's assets are currently worth $$400,000.$ Each period the value

of Goldenbust's assets $($those remaining after servicing their debt$)$ either increase or

decrease by $50\%.$ They have $150$ shares outstanding. They have, in addition, issued

$100$ bonds. Each bond

has a face value of $$1000$ and matures in $2$ periods.

receives $$100$ per period coupon.

can be converted into $0\mathrm{.}5$ shares at any time.

The company pays no dividends, the $t=0$ coupon has just been paid, the risk free rate

is $8\%$ and it is constant.

a$)$ What would be the value of their debt without the conversion feature $($straight

debt$)?$

b$)$ What is the value of the convertible debt?