The Gain from Exercising a Warrant Is Similar to the Gain

question 42

Multiple Choice

The gain from exercising a warrant is similar to the gain from exercising a call option except:

• A)The gain on a warrant is greater by the fraction of warrant shares divided by total
• Shares.
• B)The gain on a warrant is limited by the firm's value after being reduced by the debt of
• The firm.
• C)The gain on a warrant is decreased by the fraction of original shares divided by total
• Post exercise shares.
• D)Both A and B.
• E)Both B and C.

---

Definitions:

Magnuson-Moss Warranty Act

A federal law enacted in 1975 to protect consumers from deceptive warranty practices, requiring warranties for consumer products to be clearly disclosed.

Written Warranties

Guarantees provided in written form by the seller or manufacturer, promising the quality and durability of a product.

Consumer Purposes

Activities or objectives that cater to the needs and desires of individual buyers, contrasting with commercial or business aims.

Federal Trade Commission Act

A U.S. federal law established in 1914 to promote consumer protection and eliminate and prevent anticompetitive business practices.