A Bond/warrant Package Is Priced to Sell at Face Value

question 25

Essay

A bond/warrant package is priced to sell at face value ($1,000). Each bond comes with 50 detachable warrants. A warrant gives the owner the right to buy 1 share of stock at $20 per share. The value of a warrant has been estimated at $2. The bonds mature in 20 years. Similar bonds without warrants yield 10%. What is the bond's annual coupon?

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Definitions:

Action Potential

A rapid, temporary change in the electrical charge of a cell membrane, essential for nerve signal transmission.

Dendrite

A branched projection of a neuron that receives signals from other neurons or sensory stimuli and conducts these to the cell body.

Axon

An axon is a long, slender projection of a nerve cell, or neuron, that typically conducts electrical impulses away from the neuron's cell body.

Reuptake

The absorption of a neurotransmitter by a neurotransmitter transporter of a pre-synaptic neuron after it has performed its function of transmitting a neural impulse.