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) a and b are true.
D) None of these are true.

Question

Quizplus · Accepted Answer

Warrants are securities that give the holder the right, but not the obligation, to buy a specific underlying asset at a predetermined price within a certain timeframe. A rising stock price usually leads to an increase in the price of the warrant because the difference between the current stock price and the predetermined price of the warrant increases, making the warrant more valuable. However, the warrant premium is not always high at high stock prices because it also depends on other factors such as the time remaining until expiration and the volatility of the underlying asset. Therefore, option C is not entirely true and option D is not true at all.

Which of the Following Is True About Warrants