Which of the following is true about warrants?
A) At high stock prices, the warrant premium is high.
B) A rising stock price is usually followed by an increase in the price of the warrant.
C) Warrants usually allow the purchase of common and preferred stock.
D) All of these options are true.

Question

Quizplus · Accepted Answer

Warrants are financial derivatives that give the holder the right to buy the underlying stock at a specified price before the expiration date. When the stock price rises, the value of the warrant typically increases because the opportunity to buy the stock at a lower, predetermined price becomes more attractive. This is why a rising stock price usually leads to an increase in the price of the warrant.

Which of the Following Is True About Warrants