Coupon rate for bonds.
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The Perry Corporation is setting its terms on a new issue with warrants. The bonds have a 30-year maturity and semiannual coupon. Each bond will have 20 warrants attached which give the holder the right to purchase one share of Random stock per warrant. Random's investment banker estimates that each warrant has a value of $14.20. A similar straight-debt issue would require a 10.0 percent coupon. What coupon rate should be set on the bonds so that the package would sell for $1,000?
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Solution Summary
The coupon rate for bonds are discussed.
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Fair value of one warrant =$14.20
Value of 20 warrants = 20*14.20=$284
Value of the debt portion of the bond issued = $1000 -$284 = ...
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