The Gain from Exercising a Warrant Is Similar to the Gain

question 43

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 the gain on a warrant is greater by the fraction of warrant shares divided by total shares; and the gain on a warrant is limited by the firm's value after being reduced by the debt of the firm.
• E) Both the gain on a warrant is limited by the firm's value after being reduced by the debt of the firm; and the gain on a warrant is decreased by the fraction of original shares divided by total post exercise shares.

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