The intrinsic value of a warrant is calculated as:
A) (Market price of common stock + Warrant exercise price) × Number of shares specified by warrant.
B) (Market price of common stock - Warrant exercise price) × Number of shares specified by warrant.
C) (Market price of common stock + Warrant exercise price)/Number of shares specified by warrant.
D) (Market price of common stock - Warrant exercise price)/Number of shares specified by warrant.
E) None of the above.

Question

Quizplus · Accepted Answer

The intrinsic value of a warrant is calculated as the difference between the market price of common stock and the warrant exercise price, multiplied by the number of shares specified by the warrant. Option B correctly represents this calculation. Option A is incorrect because it adds the exercise price to the stock price rather than subtracting it. Option C and D are incorrect because they divide by the number of shares specified by the warrant rather than multiplying. Option E is incorrect because one of the choices must be correct.

The Intrinsic Value of a Warrant Is Calculated As