A warrant has an exercise price of $40,and the current stock price is $38.An investor holding this option will purchase the stock only if:
A) the dividend yield on the stock exceeds 10%.
B) the stock price falls below $38.
C) the stock price rises above $40.
D) the stock price falls to $20 or below.

Question

Quizplus · Accepted Answer

A warrant gives the holder the right, but not the obligation, to buy the underlying stock at the exercise price. In this case, the exercise price of the warrant is $40, which is higher than the current stock price of $38. Therefore, the investor holding this option will only purchase the stock if the stock price rises above the exercise price of $40. So, the correct answer is C: the stock price rises above $40.

A Warrant Has an Exercise Price of $40,and the Current