Which of the Following Statements Best Describes Warrants

question 34

Multiple Choice

Which of the following statements best describes warrants?

• A)Warrants are long-term put options that have value because holders can sell the firm's common stock at the exercise price regardless of how low the market price drops.
• B)Warrants are long-term call options that have value because holders can buy the firm's common stock at the exercise price regardless of how high the stock's price has risen.
• C)A firm's investors would generally prefer to see it issue bonds with warrants than straight bonds because the warrants dilute the value of new shareholders, and that value is transferred to existing shareholders.
• D)A drawback to using warrants is that if the firm is very successful, investors will be less likely to exercise the warrants, and this will deprive the firm of receiving any new capital.

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Definitions:

Customer Confidence

The trust and belief that consumers have in a company's products or services, influencing their willingness to purchase.

Rationalizer

An individual who justifies actions or decisions with logical, albeit sometimes flawed, reasoning to accommodate personal biases or avoid cognitive dissonance.

Unethical Behaviour

Actions that are considered morally wrong according to the widely accepted standards of a community or society.

Ambiguous Situations

Circumstances or scenarios that lack clarity or have multiple interpretations.