Value of straight-debt
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Thomson Engineering is issuing new 30-year bonds that have warrants attached. If not for the attached warrants, the bonds would carry an 11% annual interest rate. However, with the warrants attached the bonds will pay an 8% annual coupon. There are 30 warrants attached to each bond, which have a par value of $1,000. What is the value of the straight-debt portion of the bonds?
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The solution finds the Value of straight-debt.
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We have,
N = 30
Rate = 11%
Coupon payment = 1000*8% = 80
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