A Firm Has Outstanding Warrants That Are Exercisable at $53

question 104

Multiple Choice

A firm has outstanding warrants that are exercisable at $53 per share and entitle holders to purchase two shares of common stock. The common stock is currently selling for $55 per share. The theoretical value of the warrant is ________.

• A) $1
• B) $2
• C) $3
• D) $4

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Definitions:

Market Equilibrium

A state where the supply of a product matches its demand, resulting in stable prices.

Quantity Demanded

The aggregate quantity of a product or service that buyers are prepared to buy at a given price.

Excess Supply

A situation where the quantity of a product offered for sale by producers exceeds the quantity that consumers are willing to buy at a given price.

Quantity Supplied

The total amount of a specific good or service that producers are willing and able to sell at a particular price over a given period of time.