Which of the following statements is true of warrants?
A) A warrant is almost identical to a put option.
B) When warrants are exercised the number of warrants still outstanding increases.
C) A warrant is a combination of call and put options.
D) A warrant is issued by the corporation rather than another investor.

Question

Quizplus · Accepted Answer

A warrant is a security issued by a corporation that gives the holder the right to buy the company's stock at a certain price within a specified period. Unlike options, which are typically traded between investors, warrants are directly issued by the corporation. When a warrant is exercised, new shares of stock are issued by the corporation, increasing the total number of outstanding shares. Warrants are similar to call options but are issued by the company rather than an investor.

Which of the Following Statements Is True of Warrants