Herbert Engineering Is Issuing New 15-Year Bonds That Have Warrants

question 33

Multiple Choice

Herbert Engineering is issuing new 15-year bonds that have warrants attached.If not for the attached warrants,the bonds would carry a 9% annual interest rate.However,with the warrants attached the bonds will pay a 6% annual coupon.There are 30 warrants attached to each bond,which has a par value of $1,000.What is the value of the straight-debt portion of the bonds?

• A)$720.27
• B)$758.18
• C)$796.09
• D)$835.89
• E)$877.69

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