o make its bond offering attractive to investors, Creamy Crisp is attaching warrants. The bonds v have a 30-year maturity and semi-annual interest payments. Each bond will come with 15 warrant hat give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value of $10.00. A similar straight-debt issue would require 9% per year yield. What annualized coupon rate should be set on the bonds-with-warrants so that
o make its bond offering attractive to investors, Creamy Crisp is attaching warrants. The bonds v have a 30-year maturity and semi-annual interest payments. Each bond will come with 15 warrant hat give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value of $10.00. A similar straight-debt issue would require 9% per year yield. What annualized coupon rate should be set on the bonds-with-warrants so that
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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Transcribed Image Text:To make its bond offering attractive to investors, Creamy Crisp is attaching warrants. The bonds will
have a 30-year maturity and semi-annual interest payments. Each bond will come with 15 warrants
that give the holder the right to purchase one share of stock per warrant. The investment bankers
estimate that each warrant will have a value of $10.00. A similar straight-debt issue would require a
9% per year yield. What annualized coupon rate should be set on the bonds-with-warrants so that
the package would sell for $1,000?
7.64% per year
O 3.77% per year
O 3.58% per year
O 7.55% per year
O 8.42% per year
0730 4
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