The Pork Barrel Company has issued three-year warrants to buy 12 percent perpetual debentures at a price
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The Pork Barrel Company has issued three-year warrants to buy 12 percent perpetual debentures at a price of 120 percent. The current interest rate is 12 percent and the standard deviation of returns on the bond is 20 percent. Use the Black–Scholes model to obtain a rough estimate of the value of Pork Barrel warrants.
DebenturesDebenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who...
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The option holder misses out on the bonds interest payments The present value of these m...View the full answer
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Related Book For 
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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