Modern Windows issued warrants for one share per warrant with an exercise price of $21.On May 1,the common stock is selling for $23 a share.The lower and upper limits on the warrant value on this date are:
A)$0 and $23.
B)$0 and $21.
C)$2 and $21.
D)$2 and $23.
E)$21 and $23.

Question

Quizplus · Accepted Answer

The warrant value can be calculated as the difference between the market price of the stock and the exercise price ($23 - $21 = $2). However, since one warrant can only be used to purchase one share, the maximum value for the warrant would be the current market price of the stock ($23). Therefore, the lower and upper limits on the warrant value are $2 and $23, respectively. Option D is the best choice as it includes both limits.

Modern Windows Issued Warrants for One Share Per Warrant with an Exercise