A firm that issues warrants
A)can expect to receive additional funds if the formula value of the warrant is zero at the expiration date
B)has to pay the same per share dividend to the warrant holders as it pays to its stockholders
C)cannot issue convertible securities while the warrants are outstanding
D)can expect to receive additional funds if the formula value of the warrant is positive at the expiration date

Question

Quizplus · Accepted Answer

A warrant gives the holder the right to buy shares of the issuer's stock at a set price within a certain time frame. If the formula value of the warrant is positive at the expiration date, the warrant holder will exercise the warrant and buy shares from the issuer at the set price, providing the issuer with additional funds. Therefore, a firm that issues warrants can expect to receive additional funds if the formula value of the warrant is positive at the expiration date.

A Firm That Issues Warrants