Curry Corporation Is Setting the Terms on a New Issue

question 12

Multiple Choice

Curry Corporation is setting the terms on a new issue of bonds with warrants.The bonds will have a 30-year maturity and annual interest payments.Each bond will come with 20 warrants that give the holder the right to purchase one share of stock per warrant.The investment bankers estimate that each warrant will have a value of $10.00.A similar straight-debt issue would require a 10% coupon.What coupon rate should be set on the bonds with warrants so that the package would sell for $1,000?

• A)6.75%
• B)7.11%
• C)7.48%
• D)7.88%

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Definitions:

HCl

Hydrochloric acid, a strong corrosive acid that is a simple diatomic molecule consisting of hydrogen and chlorine, used in many industrial and scientific applications.

K

The elemental symbol for potassium, a metal that is essential for life and is used in a wide variety of industrial processes.

HA

Hyaluronic Acid, a substance naturally present in the human body and used in cosmetic products for its hydrating properties and in medicine for treating joint disorders.