Stark Industries wants to sell 15-year bonds to the school of the gifted and talented at...

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Finance

Stark Industries wants to sell 15-year bonds to the school ofthe gifted and talented at Xavier’s School. The par value of bondswill be at $1,000 and they pay interest annually. Each bond willhave 10 warrants that will give Dr. Charles Xavier the right topurchase one share of Stark Industries stock per warrant. TonyStark’s bankers estimate that each warrant will have a value of$25.00. A similar straight-debt issue would require an 8% couponrate. At what amount would the coupon rate need to be on the bondswith the warrants so that this bundled combo would be able to sellfor $1,000?
4.66%
5.08%
5.42%
5.84%
6.17%

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Stark Industries wants to sell 15-year bonds to the school ofthe gifted and talented at Xavier’s School. The par value of bondswill be at $1,000 and they pay interest annually. Each bond willhave 10 warrants that will give Dr. Charles Xavier the right topurchase one share of Stark Industries stock per warrant. TonyStark’s bankers estimate that each warrant will have a value of$25.00. A similar straight-debt issue would require an 8% couponrate. At what amount would the coupon rate need to be on the bondswith the warrants so that this bundled combo would be able to sellfor $1,000?4.66%5.08%5.42%5.84%6.17%