1. The firm's stock price is 10.34 and could go up by 20% or fall by 10% over the next year.
   1. 5-year government rate is 0.21%. Use the 5-year government rate to find the price of a European call option on the stock with an exercise price $3 less than the current stock price with a maturity of 1 year (Use either the binomial or the risk-neutral method).
   2. Your firm has 1,575,000 shares outstanding and plans to issue 90,000 warrants. Each warrant holder can purchase 3 new shares of stock. What is the value of the warrant? Assume the exercise price is the same as the call from part a.
   3. Your firm decides to issue a bond with the warrants instead. Use the debt rate (Rd) =3% as the yield for bonds without warrants. Assume the bonds are 10-year bonds with annual coupons. There are 80 warrants attached to each bond. Set the coupon rate so the total package sells for $1000.
   4. What concerns should your firm have about using warrants?