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)Both of these options are true.
D)None of these options are true.

Question

Quizplus · Accepted Answer

A warrant is a security that gives the holder the right, but not the obligation, to buy the underlying stock at a specific price and time in the future. The price of a warrant is influenced by various factors, including the price of the underlying stock. As the stock price increases, the value of the warrant also increases. Therefore, a rising stock price is usually followed by an increase in the price of the warrant. However, the warrant premium (the amount by which the warrant price exceeds the intrinsic value) is not necessarily high at high stock prices. It depends on other factors such as the time to expiration, the strike price, and the volatility of the underlying stock. Option A is not always true, but option B is generally true. Therefore, the best choice is B.

Which of the Following Is True About Warrants