Bob Corporations stock sells for $42 per share. The company wants to sell some semi-annual...
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Bob Corporations stock sells for $42 per share. The company wants to sell some semi-annual coupon payment bonds with a 10-year maturity at $1,000 today. Each bond would have 80 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firms straight bonds yield to maturity is 10%. Each warrant is expected to have a market value of $3.25 given that the current stock sells for $42. What annual coupon rate must the company set on the bonds?
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