While, unlike convertible securities, warrants cannot be called, their limited life stimulates holders to exercise them when the exercise price is below the market price of the firm's stock.

Question

Quizplus · Accepted Answer

This statement is true. Warrants have a limited life and cannot be called, which encourages holders to exercise them when the exercise price is lower than the stock price to benefit from the price difference. Unlike convertible securities, warrants do not have any mandatory conversion or redemption features, but they have an expiry date that can create a sense of urgency for holders to take advantage of the favorable market conditions before the warrant becomes worthless.

While, Unlike Convertible Securities, Warrants Cannot Be Called, Their Limited