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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Definitions:

UCC

The Uniform Commercial Code, a set of comprehensive statutes designed to unify and standardize sales and commercial transactions in all 50 states.

Counteroffer

A new offer made in response to an offer received, implying rejection of the original offer.

Finance Charge

the total cost, expressed as a monetary amount, of borrowing credit, including interest, fees, and any other charges associated with the transaction.

Rejection

The refusal to accept or agree to something, such as a proposal, offer, or contract.