SUBJECT: Warrants

Consider 100,000 20-year bonds, each with 27 warrants.

Each warrant has a strike price (also called an exercise price) of $25 and 10 years until expiration.

Each warrants value is estimated to be $5.

rd of 20-year annual payment bond without warrants = 10%.

What coupon rate must be set on the bond with warrants to make the total package sell for $1,000?

How many shares of stock will be outstanding after the warrants are exercised (there are 20 million shares at Year 0)