Which of the Following Statements Best Describes Warrants

question 34

Multiple Choice

Which of the following statements best describes warrants?

• A)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.
• B)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.
• C)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.
• D)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.

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Definitions:

Humans

Homo sapiens, the species of bipedal primates to which all modern human beings belong, characterized by advanced brain development, and capabilities for complex language and culture.

Darwin's Theory

Darwin's Theory, known as the theory of natural selection, posits that organisms best adapted to their environment are more likely to survive and reproduce, leading to evolution.

Synthetic Theory

Also known as the modern synthesis, it combines Darwin's theory of evolution with Mendelian genetics, explaining evolution as changes in gene frequencies within populations.

Evolution

The mechanism by which diverse living entities are considered to have emerged and spread from their predecessors over the course of earthly history.