Warrants are similar to options,in that the value of the warrant is limited by:
A) expiring worthless if the stock price is below the total warrant exercise price.
B) the trading capabilities of the exchange used.
C) the price of the underlying stock divided by the number of warrants needed to purchase a share.
D) Both expiring worthless if the stock price is below the total warrant exercise price; and the price of the underlying stock divided by the number of warrants needed to purchase a share.
E) Both the trading capabilities of the exchange used; and the price of the underlying stock divided by the number of warrants needed to purchase a sharE.

Question

Quizplus · Accepted Answer

Warrants are similar to options in that their value is limited by two factors:
1) If the stock price is below the total warrant exercise price, then the warrant will expire worthless.
2) The value of the warrant is determined by dividing the price of the underlying stock by the number of warrants needed to purchase a share.
Therefore, both A and C are correct, making D the best choice. B and E are not correct as they do not accurately reflect the factors that limit the value of warrants.

Warrants Are Similar to Options,in That the Value of the Warrant