Which of the following is an example of a "warrant"?
A)Right to buy 100 shares of CIBC over the next 5 years.
B)Commitment to buy 100 barrels of oil next month at $125/barrel.
C)Commitment to buy $100,000 US dollars in 4 months at US$=1.10.
D)Pay interest at prime +3% in exchange for receiving interest at 5%.

Question

Quizplus · Accepted Answer

A warrant is a financial instrument that gives the holder the right to buy a certain number of shares at a predetermined price within a specified time frame. Choice A is an example of a warrant, as it gives the holder the right to buy 100 shares of CIBC over the next 5 years. The other choices do not involve warrants; choice B is a commitment to purchase oil, choice C is a commitment to buy a certain amount of US dollars at a certain exchange rate, and choice D is an interest rate swap.

Which of the Following Is an Example of a "Warrant