This problem deals with a convertible bond Z whose value as a regular (straight) bond is 148.54 and its conversion value (as defined in the class discussions) is 138.23. Assume also that junk bond Q, whose YTM is three times larger than bond Zs YTM, is currently trade for 45.87. Give a lower bound on the price of bond Z such that the price of the bond cannot significantly fall below this lower bound, except for transitory market fluctuations (In computational problems, show the basic equation(s) you used to solve the problem. In verbal problems, briefly explain your choice and why you dismissed the other answers)

1. 148.54
2. 138.23
3. 45.87
4. 143.39 (the average of 148.54 and 138.23)
5. None of the above