Preissle Company, Wants to Sell Some 20-Year, Annual Interest, $1,000

question 28

Multiple Choice

Preissle Company, wants to sell some 20-year, annual interest, $1,000 par value bonds.Its stock sells for $42 per share, and each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47.The firm's straight bonds yield 10%.Each warrant is expected to have a market value of $2.00 given that the stock sells for $42.What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par?

• A) 7.83%
• B) 8.24%
• C) 8.65%
• D) 9.08%
• E) 9.54%

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