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?
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