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Consider a bond with an equity warrant. The warrant entitles the bondholder to buy 30 shares of the issuer at 50 per share for the
Consider a bond with an equity warrant. The warrant entitles the bondholder to buy 30 shares of the issuer at 50 per share for the lifetime of the bond. The bond is a 30-year zero coupon bond with a 1,000 par value that has a yield to maturity of i = 5 percent. The price of the bond is 400. What is the value of the warrant?
A. | 168.62 | |
B. | none of the options | |
C. | 500 | |
D. | 268.62 |
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