Which of the following is true about warrants?

Question

Quizplus · Accepted Answer

A warrant is a security that gives the holder the right, but not the obligation, to buy the underlying stock at a specific price and date in the future. As the price of the underlying stock increases, the value of the warrant also increases, leading to a rise in the warrant price. Therefore, a rising share price is usually followed by a rise in the price of the warrant. The premium of a warrant is affected by various factors, including the price of the underlying stock, time until expiration, volatility, and interest rates. Hence, the warrant premium is not independent of the market price of shares. Warrants do not guarantee a return for the holder as it depends on the future price movement of the underlying stock.

Which of the Following Is True About Warrants