Investor expected overall pre-tax rate of return

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Gregg company is issuing new 30 year bonds that have warrants attached. If not for the warrants attached, the bonds would carry an 8 % annual coupon rate. However, with warrants attached the bonds will pay 6% annual coupon. There are 25 warrants attached to each bond, which have a par value of $1000.00. The exercise price of the warrants is $30.00 and the expected stock price 15 years from now (when the warrants may be exercised) is $65.55. What is the investor's expected overall pre-tax rate of return for this bond with warrants issue?

Reference no: EM133058314

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