Warren Corporation's Stock Sells for $42 Per Share

Multiple Choice

Warren Corporation's stock sells for $42 per share.The company wants to sell some 20-year,annual interest,$1,000 par value bonds.Each bond would have 75 warrants attached to it,each exercisable into one share of stock at an exercise price of $47.The firm's straight bonds yield 10%.Each warrant is expected to have a market value of $2.00 given that the stock sells for $42.What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par?

A) 7.83%
B) 8.24%
C) 8.65%
D) 9.08%
E) 9.54%