Although Generally Attached to Bonds or Preferred Stock, Warrants Can

question 93

Multiple Choice

Although generally attached to bonds or preferred stock, warrants can also be attached to other securities, such as speculative stock. Warrants allow holder to buy more stock as its value appreciates. Below are the terms that must be considered in order to understand warrants EXCEPT:

• A) Warrants are generally attached to a bond or preferred stock and carry the right to purchase common stock at a fixed price
• B) Detached warrants can be traded and have their own value based on the current market and exercise prices. If a warrant is not detachable, it has no individual market value
• C) Warrants typically expire after a number of years
• D) When exercised, a warrant is relinquished in return for shares of common stock at the current market price

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Definitions:

Imposes a Quota

A restriction, set by a government, on the maximum number of units of a particular product that can be imported or exported within a given period.

Equilibrium

A market condition where the quantity demanded by consumers equals the quantity supplied by producers, leading to a stable price.

Quota Rent

The earned income by holders of a production or import quota, representing the difference between domestic and world prices of a good.

Government Imposes

Refers to actions or regulations that a government puts into place regarding economic or social policies.