Charles River Company has just sold a bond issue with 10 warrants attached. The bonds have a

Question:

Charles River Company has just sold a bond issue with 10 warrants attached. The bonds have a 20 years maturity, an annual coupon rate of 12 % and they sold at their $1000 par value. The current yield on similar straight bonds is 15%. What is the implied value of each warrant?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...