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# Coupon interest rate on warrants

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Coupon interest rate on warrants. Please see the attachment.
Shearson PLC's stock sells for \$42 per share. The company wants to sell some 20-year, annual interest, \$1,000 par value bonds. Each bond will have attached 75 warrants, each exercisable into one share of stock at an exercise price of \$47. Shearson's straight bonds yield 10 percent. The warrants will have a market value of \$2 each when the stock sells for \$42. What coupon interest rate must the company set on the bonds-with-warrants if the bonds are to sell at par?

https://brainmass.com/economics/bonds/coupon-interest-rate-on-warrants-304488

#### Solution Preview

The bonds and warrants should sell at the value of \$1,000 which is the par value. We find the value of bond so as to ...

#### Solution Summary

The solution explains how to determine the coupon rate on bonds such that it sells for par

\$2.19