Warren Corporation's stock sells for $42 per share. The company wants to sell some 20-year, annual interest

Question:

Warren Corporation's stock sells for $42 per share. The company wants to sell some 20-year, annual interest $1,000 bonds. Each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par?
a. 7.83%
b. 8.24%
c. 8.65%
d. 9.08%
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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...