Fishhook just went public and is considering a bond issue

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FishHook (FH) just went public and is considering a bond issue with warrants attached. The company stock is trading for $20. A reputed bond rating agency has determined that FH could issue a 10 year annual payment straight bond (without warrants) for a yield of 10% per year. The company wants to issue a 10 year annual payment bond with warrants. The exercise price is $25 for the warrants and the warrants will have a maturity of one year. There will be 100 warrants per bond. A call option on the stock with a maturity of one year and an exercise price of $25 is quoted at $2. The company has 9 million shares outstanding and plans to issue 1 million warrants with the bond issue. What should be the coupon on the bond if the bond with warrants is to sell for $1000? 

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Reference no: EM13230174

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