Concerning warrants and call options, which of the following statements generally is correct?
A)The issue procedures for both are quite similar.
B)When a call option is exercised, the ﬁrm must issue new equity.
C)When a warrant is exercised, existing equity changes hands.
D)Exercise of a call option does not affect share value, but warrant exercise does.
E)None of the above is correct.

Question

Quizplus · Accepted Answer

Exercise of a call option does not affect share value because it involves the transfer of existing shares, whereas warrant exercise involves issuing new shares, which can dilute the value of existing shares.

Concerning Warrants and Call Options, Which of the Following Statements