Which of the Following Statements Best Describes Warrants

question 2

Multiple Choice

Which of the following statements best describes warrants?

• A)One important difference between warrants and convertibles is that convertibles bring in additional funds when they are converted, but exercising warrants does not bring in any additional funds.
• B)The coupon rate on convertible debt is normally set below the coupon rate that would be set on otherwise similar straight debt even though investing in convertibles is more risky than investing in straight debt.
• C)The value of a warrant to buy a safe, stable stock should exceed the value of a warrant to buy a risky, volatile stock, other things held constant.
• D)Warrants can sometimes be detached and traded separately from the debt with which they were issued, but this is unusual.

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