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)?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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