Curran Contracting is issuing new 25-year bonds that have warrants attached. If not for the attached warrants, the bonds would carry an 11.2% annual interest rate. However, with the warrants attached the bonds will pay a 9.5% annual coupon. There are 31 warrants attached to each bond, which have a par value of $1,000. What is the implied value of each warrant? Do not round your intermediate calculations.
A. $4.10
B. $4.55
C. $5.23
D. $3.87
E. $5.46
Answer: B
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