Each warrant would have a strike price of $25 and10 years until expiration. It is estimated that eachwarrant, when detached and traded separately,would have a value of $5. The coupon on a similarbond but without warrants would be 10%.(1) What coupon rate should be set on the bondwith warrants if the total package is to sell atpar ($1,000)?
Each warrant would have a strike price of $25 and10 years until expiration. It is estimated that eachwarrant, when detached and traded separately,would have a value of $5. The coupon on a similarbond but without warrants would be 10%.(1) What coupon rate should be set on the bondwith warrants if the total package is to sell atpar ($1,000)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Each warrant would have a strike price of $25 and
10 years until expiration. It is estimated that each
warrant, when detached and traded separately,
would have a value of $5. The coupon on a similar
bond but without warrants would be 10%.
(1) What coupon rate should be set on the bond
with warrants if the total package is to sell at
par ($1,000)?
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