E) Thompson Utilities Has Issued a Bond with 50 Warrants

question 10

Multiple Choice

E) Thompson Utilities has issued a bond with 50 warrants attached. The bonds have a 20-year maturity and an annual coupon of 12%, and they were issued at their $1,000 par value. The current yield on similar straight bonds is 15%. What is the implied value of each warrant?

• A) $3.76
• B) $3.94
• C) $4.14
• D) $4.35
• E) $4.56

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Definitions:

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