Use the following statements to answer this question:
I.A warrant's value is due, in part, to its long-term maturity.
II.The intrinsic value of a warrant does not depend on the volatility of the stock.
A)I and II are correct.
B)I and II are incorrect.
C)I is correct and II is incorrect.
D)I is incorrect and II is correct.

Question

Quizplus · Accepted Answer

Statement I is correct because a warrant's long-term maturity allows the holder more time to exercise the warrant and benefit from any increase in the stock's price. Statement II is incorrect because the intrinsic value of a warrant is affected by the volatility of the underlying stock. Higher volatility can lead to a higher value of the warrant due to the potential for larger price movements.

Use the Following Statements to Answer This Question