JMR LtdIssued $100,000 of 8%, 8 Year, Non-Convertible Bond with Detachable

question 112

Multiple Choice

JMR Ltd.issued $100,000 of 8%, 8 year, non-convertible bond with detachable stock purchase warrants.KER Corp.purchased the entire issue.Each $1,000 bond carries 10 warrants.Each warrant entitles KER to purchase one common share for $20.The bond issue sells for 104 exclusive of accrued interest.Shortly after issuance, the warrants trade for $5 each and the bonds were quoted at 103 ex-warrants.The market value of the bonds and warrants using the proportional method was:

• A)$321,000
• B)$605,000
• C)$107,000
• D)$108,000

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Definitions:

Behavioral responses

The observable reactions or actions of an individual or group in response to external stimuli.

Existing patterns

Pre-established modes or paths of action that are typically followed within an organization or society.

Bounded rationality

A concept that human decision-making is limited by available information, cognitive limitations, and time constraints, leading to satisficing rather than optimal decisions.

Behavioral decision theory

A theoretical approach that studies the psychological factors influencing individuals' decision-making processes.