A warrant gives the owner:
A) the obligation to sell securities directly to the firm at a fixed price for a specified time.
B) the right to purchase securities directly from the firm at a fixed price for a specified time.
C) the obligation to purchase securities directly from the firm at a fixed price for a specified time.
D) the right to sell securities directly to the firm at a fixed price for a specified time.
E) None of these.

Question

Quizplus · Accepted Answer

A warrant is a financial instrument that gives the holder the right, but not the obligation, to buy securities (usually common stock) directly from the issuing company at a fixed price for a specified period of time. Therefore, option B is the correct choice, as it states that the warrant holder has the right to purchase securities directly from the firm at a fixed price for a specified time. Option A and C are incorrect, as they suggest an obligation to sell or purchase securities, respectively, which is not the case with warrants. Option D is also incorrect, as it implies a right to sell securities back to the issuing company, which is not a feature of warrants. Option E is clearly incorrect.

A Warrant Gives the Owner