A B 20 123456789012345678 123456 N 19 22 27 E F G H J K L M N P Q R Raptor Software is issuing new 10-year bonds that have warrants attached. If not for the attached warrants, the bonds would carry a 15.0% interest rate. However, with the warrants attached the bonds will pay a 9.0% annual coupon. There are 25 warrants attached to each bond, which have a par value of $1,000. The exercise price of the warrants is $26.00, and the expected stock price 5 years from now (when the warrants may be exercised) is $38.00. What is the investor's expected overall pre-tax rate of return (component cost of bonds with warrants) for this bond-with- warrants issue? Coupon rate Warrant exercise price number of warrants Stock price in year 5 Profit per warrant Total Warrant cash flow at year 5 28 29 30 Total return to investors 1234567890 41 42 43 44 9% Year CF 0 9 123456780 10