Thomson Engineering Is Issuing New 20-Year Bonds That Have Warrants

question 25

Multiple Choice

Thomson Engineering is issuing new 20-year bonds that have warrants attached.If not for the attached warrants,the bonds would carry an 11% annual interest rate.However,with the warrants attached the bonds will pay an 8% annual coupon.There are 30 warrants attached to each bond,which have a par value of $1,000.What is the value of the straight-debt portion of the bonds?

• A)$652.55
• B)$686.89
• C)$723.05
• D)$761.10
• E)$799.16

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