Problem: Tabloid Engineering is issuing new 15-year bonds that have 30 warrants attached. If not for the attached warrants, the bonds would carry a 8% interest rate. However, with the warrants attached the bonds will pay a 7% annual coupon and still sell for the face value of $1,000. What is the value of each warrant? Provide your rationale and any supporting data.
a) $1.40
b) $2.85
c) $3.75
d) $4.25