A company will issue 20-year bonds with annual interest payments
Question # 00004678
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Updated on: 12/05/2013 10:28 AM Due on: 12/05/2013
A company will issue 20-year bonds with annual interest payments. Each bond will include 30 warrants that give the holder to purchase one share of stock per warrant. Each warrant is expected to have a value of $5.75. A similar straight-debt issue would require an 8% coupon. What coupon rate should be set on the bonds with warrants so that the package will sell for $1,000?
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Solution: A company will issue 20-year bonds with annual interest payments