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:

Narcotic Drug

Substances that can change a person's consciousness or mood and are often used for pain relief but can lead to addiction.

Behaviorism

A theory of learning which states that all behaviors are acquired through conditioning processes and interactions with the environment, without the need for internal thoughts or feelings.

Mental Processes

Internal cognitive operations that include thinking, perceiving, planning, and understanding, which underlie an individual's reactions to various situations and stimuli.

Behavior

The actions or reactions of an object or organism, often in response to the environment.