Stark Industries wants to sell 15-year bonds that pay interest annually. The par value of bonds...

Stark Industries wants to sell 15-year bonds that pay interest annually. The par value of bonds will be at $1,000. Stark Industries stock is selling for $45 per share, and each bond issued will have 50 warrants attached to it. Each warrant is exercisable into one share of stock at an exercise price of $50. Stark Industries straight bonds yield 10%. Each warrant is expected to have a market value of $4.00 given that the stock sells for $45. In order for Stark Industries to sell the bonds with warrants, what amount should the coupon interest rate be at?

7.37%

8.34%

8.68%

9.18%

9.74%

Expert Solution

jeff jeffy answered 10 months ago

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