What is the value of each warrant

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Reference no: EM131322238

1. Thomson Engineering is issuing new 15-year bonds that have 30 warrants attached. If not for the attached warrants, the bonds would carry a 9% interest rate. However, with the warrants attached the bonds will pay a 6% annual coupon and still sell for the face value of $1,000. What is the value of each warrant?

a) $7

b) $8

c) $9

d) $10

2. A firm currently has 20,000,000 shares with a price of $25 per share. They want to issue another 2,000,000 shares so they give each shareholder the right to buy .1 shares of new stock for $2 (it will take ten rights to buy one new share for $20). How much are each of those rights worth?

a) $0.24

b) $.45

c) $.76

d) $1.11

Reference no: EM131322238

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