1. Thomson Engineering is issuing new 15-year bonds that have 30 warrants attached. If not for the attached warrants, the bonds would carry a 9% interest rate. However, with the warrants attached the bonds will pay a 6% annual coupon and still sell for the face value of $1,000. What is the value of each warrant?
a) $7
b) $8
c) $9
d) $10
2. A firm currently has 20,000,000 shares with a price of $25 per share. They want to issue another 2,000,000 shares so they give each shareholder the right to buy .1 shares of new stock for $2 (it will take ten rights to buy one new share for $20). How much are each of those rights worth?
a) $0.24
b) $.45
c) $.76
d) $1.11