Problem:
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000.
Required:
Question: What is the implied value of the warrants attached to each bond?
Note: Explain all calculation and formulas.