Warrants

Maese Industries Inc. has warrants outstanding that permit the holders to purchase $1$ share of stock per warrant at a price of $$21.$

a$.$ Calculate the exercise value of a warrant at each of the following common stock prices: $(1)$ $$20,(2)$$$25,(3)$ $$30,(4)$ $$100.($Hint: A

warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were

to be exercised.$)$ If your answer is zero, enter $"0".$ Round your answers to the nearest dollar.

$(1)$ $$20$$

$(2)$ $$25$$

$(3)$ $$30$$

$(4)$ $$100$$

b$.$ Assume the firm's stock now sells for $$20$ per share. The company wants to sell some $20-$year, $$1,000$ par value bonds with interest

paid annually. Each bond will have attached $50$ warrants, each exercisable into $1$ share of stock at an exercise price of $$25.$ The firm's

straight bonds yield $11\%.$ Assume that each warrant will have a market value of $$4$ when the stock sells at $$20.$ What coupon interest

rate must the company set on the bonds with warrants if they are to clear the market? $($Hint: The convertible bond should have an

initial price of $$1,000.)$ Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

What dollar coupon must the company set on the bonds with warrants if they are to clear the market? $($Hint: The convertible bond

should have an initial price of $$1,000.)$ Do not round intermediate calculations. Round your answer to the nearest dollar.

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