Which the Following Is True of Stock Purchase Warrants

question 3

Multiple Choice

Which the following is true of stock purchase warrants?

• A) When a firm makes a large issue of debt, the attachment of stock purchase warrants may deteriorate the marketability of the issue.
• B) Warrants are similar to conversion features on debt.
• C) Suppliers of debt are more likely to require warrants on an issue of debt from an existing corporation than from a new firm.
• D) The attachment of warrants increases the required interest rate.

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Definitions:

Honesty

The quality of being truthful and free from deceit or fraud.

Holder In Due Course

A legal term for a party that has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defects in title and prior claims.

Consideration

The value (such as money, service, or goods) that is exchanged between parties in a contract, making the agreement legally binding.

Value

The importance, worth, or usefulness of something, often in terms of money, social benefits, or personal significance.