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

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

4.66%

5.08%

5.42%

5.84%

6.17%

Jan 31 2020 View more View Less

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