A bond with 10 detachable warrants has just been offered for sale at $1,000. The bond matures in 15 years and has an annual coupon of $120. Each warrant gives the owner the right to purchase two shares of stock in the company at $18 per share. Ordinary bonds (with no warrants) of similar quality are priced to yield 18 percent. What is the value of one warrant?

A bond with 10 detachable warrants has just been offered for sale at $1,000. The bond matures in 15 years and has an annual coupon of $120. Each warrant gives the owner the right to purchase two shares of stock in the company at $18 per share. Ordinary bonds (with no warrants) of similar quality are priced to yield 18 percent. What is the value of one warrant?

Multiple Choice

$30.55

$69.45

$36.66

$27.49

$33.60