Chapter 20: Hybrid Financing 1. Warren Corporation's stock sells for $42 per share. The company wants to sell some semi-annual coupon payment bonds with 8 -year maturity at par value ($1,000) today and each bond would have 90 warrants attached to it, each exercisable into one share of stock at an exereise price of \$45. The firm's straight bonds yield to maturity is 7%. Each warrant is expected to have a market value of $3.00 given that the current stock sells for $42. What annual coupon rate must the company set on these bonds? ( 5 points)