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 stock.
C) When a warrant is exercised, existing stock changes hands.
D) Exercise of a call option does not affect share value, but warrant exercise does.

Question

Quizplus · Accepted Answer

When a warrant is exercised, new shares are issued, which can dilute the value of existing shares. In contrast, call options typically involve existing shares, so their exercise does not affect the total number of shares or their value.

Concerning Warrants and Call Options, Which of the Following Statements