Acme stock price is currently $10 per share. Acme's warrants have a price of $7 per warrant. Each warrant enables the holder to purchase three shares of Acme's common stock for $8 per share. What is the speculative premium on the warrant
Q: Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock…
A: Warrants are options to purchase share at a specified exercise price. Warrants could be issued along…
Q: National Corporation expects to pay a dividend of P5 per share at the end of year one, P9 per share…
A: The most latest price at which a security was sold on an exchange is the current price. Buyers and…
Q: Warren Corporation's stock sells for $42 per share. The company wants to sell some 20-year, annual…
A: Coupon rate = interest / face value Current price of bond = present value of interest + Present…
Q: Preissle Company, wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock…
A: Warrant give a right but not the obligation to buy or sell a security, most commonly equity.
Q: An investor pays $30,000 for a convertible bond (one that can be converted into shares of corporate…
A: The convert price is the price per share at which a convertible security may be exchanged into…
Q: ABC Corporation is issuing Ten-year $1,000 Par Value 12% coupon bonds with interest paid every six…
A: The question is based on the concept valuation of bond with annual coupon payment. Formula as,
Q: Potter Industries Inc. has warrants outstanding that permit its holders to purchase 1 share of stock…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: Preissle Company, wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock…
A: Note : As per the bartelby guidelines only the first question will be answered . Given information :…
Q: Maese Industries Inc. has warrants outstanding that permit the holders topurchase 1 share of stock…
A: Warrant: Warrants are the instruments that have characteristics of derivatives. These instruments…
Q: You would like to sell 200 shares of Xenith Bankshares, Inc. (XBKS). The current ask and bid quotes…
A: Bid size is the number of securities that investors are ready to buy at a certain bid price. The bid…
Q: The warrants of Integra Life Sciences allow the holder to buy a share of stock at $14.75 and are…
A: A warrant is kind of a derivative in which the buyer or seller has the right to but it the…
Q: What is the speculative value AND intrinsic value of a warrant that sells for 80, when the warrant…
A: A stock is a financial instrument that is issued by a corporation to raise equity funds from the…
Q: The Land Company wants to raise its working capital. After analysis of the available options, the…
A: Share Warrant The purpose of issuing the share warrant to get the opportunity to use these warrant…
Q: A 6 percent corporate coupon bond is callable in five years for a call premium of one year of coupon…
A: Bonds are the fixed interest bearing securities that are issued by the companies.
Q: You purchased a $1,000 bond with a coupon rate of 8 % on January 1, 2021 for $910. On the same date…
A: Answer:- Meaning of bond:- Bonds are corporate debt units that are securitized as assets which are…
Q: Assume you purchased 2000 shares of XYZ common stock on margin at $ 30 per share from your broker .…
A: Interest amount will be computed by finding the leverage amount taken from the broker.
Q: Twenty years ago, Artic BBQs issued preferred stock that pays an annual dividend equal to 5.5…
A: Annual Dividend = 5.5% Par Value = $160 Require return = 11%
Q: RightWay Transport's common stock currently sells for $39 and its 9.0% convertible debentures…
A: In this question we need to compute the conversion value of the bond.
Q: JPS plc's current share price is £3.63. An investor is wondering whether to buy shares in JPS or…
A: A warrant on a stock gives the holder the right but not the obligation to buy and sell the…
Q: Mr. X has a limited cash balance of P1,000,000.00. (b) The buying price of the stock is P10 per…
A: Mr. X should sell his shares to Mr. Y if his sale proceeds cover costs associated with the stock i.e…
Q: Laos Company wants to raise its working capital. After analysis of the available options, the…
A: Shareholders also invest money in the company and in return they become the owners in proportion to…
Q: Kendra Corporation's preferred shares are trading for $27 in the market and pay a $4.10 annual…
A: Preferred stock, often known as preferred stock, is a type of stock that pays dividends to…
Q: Table Company, wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock sells…
A: Given the following information: Value of Bond = $1000 Number of Warrants = 80 The market price of…
Q: Six years ago, The Singleton Company sold a 20-year bond issue with a 14 percent annual coupon rate…
A: Callable bonds are those that could be redeemed at the option of issuer, prior to its maturity date…
Q: Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock…
A: The Exercise value of the warrant: A warrant's exercise value is the difference between the stock…
Q: Mr. X has a limited cash balance of P1,000,000.00. (b) The buying price of the stock is P10 per…
A: Mr. X should sell his shares to Mr. Y if his sale proceeds cover costs associated with the stock i.e…
Q: Dragon Corporation has three types of debt outstanding, even though it has plenty of cash. Coupons…
A: Bond is a financial instrument whereby the issuer of the bond raises (borrows) capital or funds at a…
Q: Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000…
A: Computation::-
Q: Knightly Co’s stock price is currently $10 per share. Knightly's warrants have a price of $7 per…
A:
Q: (a) How much should an investor pay for a $1,000 ARA Corporation bond? (b) Discuss reasons why an…
A: Bond: It is a debt instrument issued by the company for raising debt capital. Hence the bond holder…
Q: An investor holds 100 three-year zero coupon bonds with a face value of £100 which each trade at a…
A: Face Value of three year Bond £ 100.00 Time Period (In Years) 3 Price of three year bond £…
Q: Today is 1 July, 2022, Georg plans to purchase a corporate bond with a coupon rate of jz = 4.77%…
A: The present value of a bond is the price which the bondholder may receive in exchange of the bond…
Q: Mr. X has a limited cash balance of P1,000,000.00. (b) The buying price of the stock is P10 per…
A: Net income would be sale proceeds less purchase value , interest costs and transaction costs.
Q: On September 27, 2015, Koala, Inc. issued a 10 year bond (with a typical $1,000 face value) that had…
A: (Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…
Q: Pamsole, Inc. has issued a bond with 40 warrants attached. The bonds have a 15-year maturity and an…
A: Total value = Straight-debt value + Warrant value Straight-debt value= Present Value of Coupon…
Q: Smith & Wesson Inc. just sold a bond with 50 warrants attached. The bonds have a 20-year…
A: Yield to maturity 20 coupon amount (PMT) = 12%*1000 120 Face value 1000 Yield rate 15.00%…
Q: Which tranche has the shortest maturity, and which tranche has the most prepayment protection
A: Introduction: The term tranche can be defined as small units of joined collection of securities…
Q: What happens in the case of a bond selling for $1,000 that can be converted to 20 shares of stock…
A: Conversion bonds are those bonds which can be converted into equity at MATURITY.
Q: Motown Ltd. has issued 100,000 units of convertible bonds with a nominal value of Rs.1000 each. The…
A: Given: Market price of share at conversion = Rs. 25 Redeemable value of the bond = Rs.1,100 Number…
Q: Mr. X has a limited cash balance of P1,000,000.00. (b) The buying price of the stock is P10 per…
A: Mr. X should sell his shares to Mr. Y if his sale proceeds cover costs associated with the stock i.e…
Acme stock price is currently $10 per share. Acme's warrants have a price of $7 per warrant. Each warrant enables the holder to purchase three shares of Acme's common stock for $8 per share. What is the speculative premium on the warrant?
and
Suppose that an investor buys a 100-share call option for $250. It has an exercise price of $60. The underlying price per share of the stock at expiration is $66. What then is the amount of profit or loss, ignoring brokerage fees?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $25. a. Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant’s exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) b. Assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 50 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm’s straight bonds yield 12%. Assume that each warrant will have a market value of $3 when the stock sells at $20. What coupon interest rate, and dollar coupon, must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.)Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $29. Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) If your answer is zero, enter "0". Round your answers to the nearest dollar. (1) $20 $ (2) $25 $ (3) $30 $ (4) $100 $The Gifford Investment Company bought 90 Cable Corporation warrants one year ago and would like to exercise them today. The warrants were purchased at $25 each, and they expire when trading ends today. (Assume there is no speculative premium left.) Cable Corporation common stock was selling for $49 per share when Gifford Investment Company bought the warrants. The exercise price is $41, and each warrant entitles the holder to purchase two shares of stock, each at the exercise price. What was the intrinsic value of a warrant at that time? What was the speculative premium per warrant when the warrants were purchased? The purchase price, as indicated earlier, was $25. What would Gifford’s total dollar profit or loss have been had it invested the $2,250 directly in Cable Corporation’s common stock one year ago at $49 per share? Cable Corporation common stock is selling today for $59 per share. What would the percentage rate of return be on this common stock investment? Compare this to…
- An investor has P1,000 that she is interested in investing in National Inc. stock, which is currently selling for P50 per share. National Inc.'s warrants are selling for P12 per warrant. Each warrant entitles the holder to purchase three shares of National Inc.'s common stock for P47 per share. The warrant premium isPotter Industries Inc. has warrants outstanding that permit its holders to purchase 1 share of stock per warrant at a price of $18. (Refer to Chapter 18 for parts a, b, and c.) a. Calculate the exercise value of Potter’s warrants if the common stock sells at each of the following prices: $18, $21, $25, and $70. b. At what approximate price do you think the warrants would sell under each condition indicated in part a? What premium is implied in your price? Your answer will be a guess, but your prices and premiums should bear reasonable relationships to each other. c. How would each of the following factors affect your estimates of the warrants’ prices and premiums in part b? The life of the warrant is lengthened. The expected variability (sp) in the stock’s price decreases. The expected growth rate in the stock’s EPS increases. The company announces the following change in dividend policy: Whereas it formerly paid no dividends, henceforth it will pay out all earnings as dividends. d.…An investor has P1,000 that she is interested in investing i Huan Inc. stock, which is currently selling for P50 per share.Huan Inc.'s warrants are selling for P12 per warrant. Each warrant entitles the holder to purchase three shares of Huan Inc.'s common stock for P47 per share. The warrant premium is Format: 1
- Wilbourne Corporation issues $250,000 of 10% preferred stock to investors who pay cash for the shares. Suppose the preferred shares are issued with a mandatory redemption feature that requires Wilbourne to buy back the stock in five years for $250,000. Should the instrument be classified as preferred stock? Justify your answerLakeshore Gelato issues 2, 500 shares of $30 par preferred stock with detachable warrants for $215, 000 on January 1, 20Y1. Each share of preferred stock is issued with 10 detachable warrants. Each warrant entitles the holder to purchase one share of common stock for $25. The warrants expire in 2 years. The fair market value of the preferred stock is $145, 000 on January 1, 20Y1, and the warrants sell for $3 per warrant. On July 1, 20Y2, the warrants are exercised to purchase common stock (with a par value of $10 per share). The exercise price is $25 per share. Record the Lakeshore Gelato Entries (rounded to the penny) for: (1) Issuance (round the aggregate value percentage to two decimals ie 75.45%) (2) Exercise of WarrantsOn January 1, 2018, when its $30 par value common stock was selling for $70 per share, a corporation issued $20 million of 12% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert it into six shares of the corporation’s $30 par value common stock. The debentures were issued for $21 million. At the time of issuance, the present value of the bond payments was $18.50 million, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2019, the corporation’s $30 par value common stock was split 3 for 1. On January 1, 2020, when the corporation’s $10 par value common stock was selling for $80 per share, holders of 40% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums. Required: 1. Prepare the journal entry to record the original…
- Preissle Company, wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock sells for $42 per share, and each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par? a. 7.83% b. 8.24% c. 9.54% d. 9.08% e. 8.65%Preissle Company, wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock sells for $42 per share, and each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par? a. 7.83% b. 8.24% c. 9.54% d. 9.08% e. 8.65% QUESTIONS REGARDING SOLUTION IN PHOTO: 1. Where does 0.05 come from? 2. How do you get to the 40th power? 3. When calculating the coupon, where does 1.05 come from? 4. How do you go from coupon to coupon rate?On January 1, 2021, Kat Company has decided to raise additional capital by issuing P5,000,000 face value, 5 year bonds with interest rate of 12% payable annually on December 31. To help the sale of the bonds, share warrants are issued – one warrant for each P1,000 bond sold. The warrant entitles the holder to purchase 5 shares at P100 per share. The par value of the share is P50. It is reliably determined that the value of the warrants is P30 each time of issuance of the bonds. The bonds are sold for P5,100,000 with warrants but would have sold only at P4,657,000 without warrants with 14% effective yield. On December 31, 2021, 60% of the share warrants were exercised and the remaining warrants expire on April 1, 2022. 1. The total share premium to be credited to share premium – issuance on December 31, 2021 is: 2. The carrying amount of the bonds as of December 31, 2022 is: