A Warrant Carries an Option to Purchase Two Shares at $35

question 54

Multiple Choice

A warrant carries an option to purchase two shares at $35. The warrant's minimum value is determined to be $25. At what price is this company's common stock currently trading?

• A)$25.5
• B)$50.0
• C)$47.5
• D)$70.0
• E)$95.0

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Definitions:

Hedge Ratio

The ratio of the size of a position in a hedging instrument to the size of the position being hedged.

Strike Price

The price at which the holder of an option contract has the right to buy or sell the underlying asset.

Underlying Stock

The stock on which a derivative instrument, such as an option or future, is based.

Implied Volatility

A measure of the market's forecast of a likely movement in a security's price and is used to price options contracts.