How are warrants used in corporate financing?

Jump to Solution
Category:

How are warrants used in corporate financing?

0
0

How are warrants used in corporate financing?

Explanation & AnswerSolution by a verified expert

Explanation

Corporations with high uncertainty in their future have higher risks. Investors will require higher returns/interest from a bond issued from these corporations. If the corporation cannot afford such a high interest rate from bond issuance, warrants may be issued along with the bonds to lower the interest rate. The warrants will attract investors to buy the bonds by providing the possibility of equity appreciation in addition to the coupon interest payments.

Sample Response

Corporations issue warrants as part of their fundraising activities to lower the nominal interest on the bonds and invite more investors to buy the securities they will issue along with the warrants.

Purchase this answer to view it. $5
Login/Sign up for free, load your wallet instantly using PayPal or cards and purchase this solution to view it.

Looking for the solution to this or another homework question?

If you need essay writing assistance or homework solutions, log in or sign up for a free account and ask our writers any homework question.