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What coupon interest rate must the company set on the bonds

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Problem 1: Preissle Company, wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock sells for $42 per share, and each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par?

Option a. 8.24%

Option b. 8.65%

Option c. 9.54%

Option d. 9.08%

Option e. 7.83%

Reference no: EM132613773

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