A Warrant Is Attached to a $1,000 Par, 10 Percent

Multiple Choice

A warrant is attached to a $1,000 par, 10 percent, 10-year bond, paying annual interest and having 20 warrants attached for the purchase of a firm's stock. The bonds were initially sold for $1,200. When issued, similar risk, straight bonds were selling at a 14 percent rate of return. The implied price of the warrant is ________.

A) $10.40
B) $20.40
C) $10.00
D) $20.00