Upstate Water Company Just Sold a Bond with 50 Warrants

question 39

Multiple Choice

Upstate Water Company just sold 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:

Self-Government

The right or ability of a community or nation to govern itself without external control, making its own laws and policies.

Slavery

A system in which individuals are owned by others, deprived of personal freedom, and forced to perform labor or services against their will.

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A form of government where the country is considered a "public matter" and is governed by representatives elected by the citizen body, not by a monarch.