3. 12.

Calculating company option values [LO 24.6] A bond with 20 detachable company options has just been offered for sale at $1 000, its face value. The bond matures in 20 years and has an annual coupon of $24. Each company option gives the owner the right to purchase two shares in the company at

$45 per share. Ordinary bonds (with no company options) of similar quality are priced to yield 6 per cent. What is the value of one company option?