Which of the Following Statements Concerning Warrants Is CORRECT

question 19

Multiple Choice

Which of the following statements concerning warrants is CORRECT?

• A) Bonds with warrants and convertible bonds both have option features that their holders can exercise if the underlying stock's price increases. However, if the option is exercised, the issuing company's debt declines if warrants were used but remains the same if it used convertibles.
• B) Warrants are long-term put options that have value because holders can sell the firm's common stock at the exercise price regardless of how low the market price drops.
• C) Warrants are long-term call options that have value because holders can buy the firm's common stock at the exercise price regardless of how high the stock's price has risen.
• D) A firm's investors would generally prefer to see it issue bonds with warrants than straight bonds because the warrants dilute the value of new shareholders, and that value is transferred to existing shareholders.
• E) A drawback to using warrants is that if the firm is very successful, investors will be less likely to exercise the warrants, and this will deprive the firm of receiving any new capital.

Identify the elements required to prove duress and its effect on contracts.

Grasp the concept of scienter and its relevance in cases of fraud.

Comprehend the circumstances under which nondisclosure can lead to the invalidation of a contract.

Recognize the role of unilateral mistake in contract law and its potential to invalidate agreements.

---

Definitions:

Sociologists

Social scientists who study the development, structure, and functioning of human society.

Everyday Life

The routine and ordinary aspects of day-to-day living experienced by individuals across various contexts.

Ethnomethodological Analysis

The study and examination of the routine methods and practices that individuals use to navigate and make sense of social interactions.

Neutrally Defining

The act of characterizing or identifying something in a manner that is unbiased and without inherent positive or negative connotations.