All of the following are true of stock-purchase warrants EXCEPT
A) when a firm makes a large issue of debt, the attachment of stock-purchase warrants may add to the marketability of the issue.
B) warrants are similar to conversion features on debt.
C) suppliers of debt are more likely to require warrants on an issue of debt from an existing corporation than from a new firm.
D) the attachment of warrants may lower the required interest rate.

Question

Quizplus · Accepted Answer

It is typically more common for suppliers of debt to require warrants on an issue of debt from a new firm rather than an existing corporation. This is because a new firm may have less of a financial track record and may be seen as a riskier investment, making the warrants a form of security for the debt provider.

All of the Following Are True of Stock-Purchase Warrants EXCEPT