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Unformatted text preview: and conversion value of the bond for each common
stock price given. Plot the per-share common stock prices on the x axis and
the bond values on the y axis. Use this graph to indicate the minimum market
value of the bond associated with each common stock price. LG5 16–14 Implied prices of attached warrants Calculate the implied price of each warrant
for each of the bonds shown in the following table. Bond Price of bond
attached Par value A $1,000 $1,000 B 1,100 1,000 C 500 500 D 1,000 1,000 Coupon
12 % Interest rate
straight bond Years to
attached to bond 13% 15 10 12 10 30 10 11 20 5 11 12 20 20 9.5 CHAPTER 16 Hybrid and Derivative Securities 705 LG5 16–15 Evaluation of the implied price of an attached warrant Dinoo Mathur wishes
to determine whether the $1,000 price asked for Stanco Manufacturing’s bond
is fair in light of the theoretical value of the attached warrants. The $1,000-par,
30-year, 11.5%-coupon-interest-rate bond pays annua...
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This document was uploaded on 01/19/2014.
- Fall '13