Mercury Inc

question 64

Multiple Choice

Mercury Inc. issued bonds with warrants attached that had an exercise price of $22. Each warrant allows the holder to purchase two shares. Since the issuance, the stock split 2 for 1, the current stock price is $24 and the warrant price is $30. How much is the warrant selling above its formula value?

• A) 84.6%
• B) 130.8%
• C) 15.4%
• D) 269%

---

Definitions:

MC Curve

Marginal cost curve represents how the cost of producing one more unit of a good changes as production scales.

Market Quantity

The total amount of a good or service supplied and purchased in a market at a given price.

Fixed Costs

Costs that do not vary with the quantity of output produced, such as rent or salaries.

Economic Profit

The difference between total revenue and total cost, including both explicit and implicit costs, representing excess earnings over the opportunity cost of capital.