Question

A bond with 10 detachable warrants has just been offered for sale at $1,000. The bond...

A bond with 10 detachable warrants has just been offered for sale at $1,000. The bond matures in 10 years and has an annual coupon of $53. Each warrant gives the owner the right to purchase two shares of stock in the company at $47 per share. Ordinary bonds (with no warrants) of similar quality are priced to yield 7 percent.

What is the value of one warrant? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  Value of one warrant $   
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1


Using financial calculator BA II Plus - Input details:

#

I/Y = Rate or yield / frequency of coupon in a year =

              7.000000

PMT = Coupon rate x FV / frequency =

-$53.00

N = Number of years remaining x frequency =

10.00

FV = Future Value =

-$1,000.00

CPT > PV = Present value of bond = Bond value =

$880.60

Total value of warrant = Offer price – Bond value

Total value of warrant = 1000 - 880.60

Total value of warrant = 119.40

.

Value of one warrant = Total value of warrant / Number of warrants attached

Value of one warrant = 119.40 / 10

Value of one warrant = $11.94

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A bond with 25 detachable warrants has just been offered for sale at $1,000. The bond...
A bond with 25 detachable warrants has just been offered for sale at $1,000. The bond matures in 15 years and has an annual coupon of $120. Each warrant gives the owner the right to purchase two shares of stock in the company at $14 per share. Ordinary bonds (with no warrants) of similar quality are priced to yield 17 percent. What is the value of one warrant?
2. Babcock Industries has just sold a bond issue with 10 warrants attached to each bond....
2. Babcock Industries has just sold a bond issue with 10 warrants attached to each bond. The bonds have a 20-year maturity, an annual coupon rate of 12%. They sold at an original offering price of $1,000. The current yield-to-maturity of bonds of equal risk, but without warrants is 15%. What is the value of each warrant?
Troy has decided to sell $3 million of 10 year debentures with warrants at their $1,000...
Troy has decided to sell $3 million of 10 year debentures with warrants at their $1,000 face value. The debentures carry a coupon of 12%. Each debenture will have attached 10 warrants, each warrant exercisable into two shares of common stock at an exercise price of $35. Each warrant is expected to trade at a market value of $5. Currently Troy has only one outstanding issue of straight debentures which trade to yield 14%. These debentures will mature in 10...
Bengts Inc offered detachable 10-year warrants to buy six shares of common stock (par value $1)...
Bengts Inc offered detachable 10-year warrants to buy six shares of common stock (par value $1) at $30 (at a time when the stock was selling for $35)The price paid for 500,$1,000 bonds with the warrants attached was $660,000. The market price of the Bengts bonds without the warrants was $540,000 and the market price of the warrants without the bonds was $90,000. What amount should be allocated to the bond premium or discount?
Bonds with Detachable Warrants Langdon & Co. issues bonds with a face value of $50,000 for...
Bonds with Detachable Warrants Langdon & Co. issues bonds with a face value of $50,000 for $51,000. Each $1,000 bond carries 10 warrants, and each warrant allows the holder to acquire one share of $1 par common stock for $40 per share. Immediately after the issuance, the bonds are quoted at 99 ex rights and the warrants are quoted at $5 each. Calculate the value to be assigned to the bonds and to the warrants. Round your answers to two...
A negotiable, corporate bond is being offered for sale by individual Equal 2. The bond has...
A negotiable, corporate bond is being offered for sale by individual Equal 2. The bond has a face value of $1,000 and a coupon rate of 8% with the next payment in exactly one year. The maturity of the bond is in 8 years. The interest rate on similar risk bonds is 8%. What is the market value of the bond being offered for sale by individual Equal 2?
Headland Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock...
Headland Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record the issuance of the bonds and warrants. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for...
Carla Corporation issued 2,200 $1,000 bonds at 103. Each bond was issued with one detachable stock...
Carla Corporation issued 2,200 $1,000 bonds at 103. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $46. Use the proportional method to record the issuance of the bonds and warrants. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for...
You have been hired to value a new 20-year callable, convertible bond. The bond has a...
You have been hired to value a new 20-year callable, convertible bond. The bond has a coupon rate of 2.8 percent, payable semiannually, and its face value is $1,000. The conversion price is $59, and the stock currently sells for $46. a. What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 3 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the conversion premium...
You have been hired to value a new 20-year callable, convertible bond. The bond has a...
You have been hired to value a new 20-year callable, convertible bond. The bond has a coupon rate of 8.4 percent, payable semiannually, and its face value is $1,000. The conversion price is $67, and the stock currently sells for $54. a. What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 9 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the conversion premium...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT