3.5

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-value, 30 year, 11.8%-coupon-interest-rate bond pays annual interest and has 10 warrants attached for purchase of common stock. The theoretical value of each warrant is $12.83. The interest rate on an equal-risk straight bond is currently 13.1% a. Find the straight value of Stanco Manufacturing's bond. b. Calculate the implied price of all warrants attached to Stanco's bond. c. Calculate the implied price of each warrant attached to Stanco's bond. d. Compare the implied price for each warrant calculated in partc to its theoretical value. On the basis of this comparison, what assessment would you give Dinoo with respect to the faimess of Stanco's bond price? Explain. a. The straight value of Stanco's bond is $(Round to the nearest cent.) b. The implied price of all warrants attached to Stanco's bond is $. (Round to the nearest cent.) c. The implied price of each warrant is $. (Round to the nearest cont.) d. Compare the implied price for each warrant calculated in partc to its theoretical value. On the basis of this comparison, what assessment would you give Dinoo with respect to the faimess of Stanco's bond price? Explain. b. Calculate the implied price of all warrants attached to Stanco's bond. c. Calculate the implied price of each warrant attached to Stanco's bond. d. Compare the implied price for each warrant calculated in partc to its theoretical value. On the basis of this comparison, what assessment would you give Dinoo with respect to the faimess of Stanco's bond price? Explain. b. The implied price of all warrants attached to Stanco's bond is $. (Round to the nearest cent.) c. The implied price of each warrant is $(Round to the nearest cent.) d. Compare the implied price for each warrant calculated in partc to its theoretical value. On the basis of this comparison, what assessment would you give Dinoo with respect to the faimess of Stanco's bond price? Explain. The implied price of the theoretical value of which makes the bond an investment. (Select from the drop-down menus.) is Enter your answer in each of the answer boxes