In: Finance
A)
A bond with 30 detachable warrants has just been offered for sale at $1,000. The bond matures in 20 years and has an annual coupon of $66. Each warrant gives the owner the right to purchase two shares of stock in the company at $56 per share. Ordinary bonds (with no warrants) of similar quality are priced to yield 9 percent. |
What is the value of one warrant? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
B)
The following facts apply to a convertible bond making semiannual payments: |
Conversion price | $ | 37 | /share |
Coupon rate | 3.6 | % | |
Par value | $ | 1,000 | |
Yield on nonconvertible debentures of same quality | 4 | % | |
Maturity | 10 | years | |
Market price of stock | $ | 36 | /share |
What is the minimum price at which the convertible should sell? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
*PLZ ANSWER BOTH PARTS A &B **