Question

The proceeds from the sale of debt with detachable stock warrants should be allocated between the two securities based on the:

a) face value of the bonds.
b) face value of the bonds and market value of the warrants.
c) aggregate fair market value of the bonds and the warrants.
d) fair market value of the bonds.

Answer 1

The proceeds from the sale of debt with detachable stock warrants should be allocated between the two securities based on the aggregate fair market value of the bonds and the warrants.

Step-by-step explanation:

The proceeds from the sale of debt with detachable stock warrants should be allocated between the two securities based on the aggregate fair market value of the bonds and the warrants. This means that the total value of both the bonds and the warrants should be considered when determining how to allocate the proceeds.