A warrant which does not expire until several years in the future which provides its owner the opportunity to buy a stock. If the stock price rises, the warrant will probably sell for
A) less than its intrinsic value.
B) exactly its intrinsic value.
C) more than its intrinsic value.
D) less than or equal to its intrinsic value.

Question

Quizplus · Accepted Answer

A warrant is a financial instrument that gives its owner the right, but not the obligation, to buy a certain underlying asset, such as a stock, at a specified price within a certain time period. If the stock price rises during this time period, the warrant will become more valuable, as the owner can still buy the stock at the lower specified price. Therefore, the warrant will probably sell for more than its intrinsic value, which is the difference between the stock price and the specified price at which the warrant can be exercised.

A Warrant Which Does Not Expire Until Several Years in the Future