The exercise price or option price of a warrant is normally set ________.
A) below the book value of the firm's stock at the time of issuance
B) equal to the market price of the firm's stock at the time of issuance
C) above the market price of the firm's stock at the time of issuance
D) above the book value of the firm's stock at the time of issuance

Question

Quizplus · Accepted Answer

The exercise price or option price of a warrant is normally set above the market price of the firm's stock at the time of issuance to provide an incentive for investors to purchase the warrant and provide needed capital to the firm. This also allows the investors to benefit if the stock price appreciates in the future, as they can purchase the shares at a lower price than the market price.

The Exercise Price or Option Price of a Warrant Is