Concept explainers
a.
To calculate: The intrinsic value of the warrant.
Introduction:
Warrant:
It is a security that provides its holder with an entitlement of buying the underlying shares of a corporation at a price fixed by it.
Intrinsic value:
It is the value that helps in measuring the worth of an asset. It is computed using valuation models which are based on the qualitative as well as quantitative aspects of business.
b.
To calculate: The speculative premium on the warrant.
Introduction:
Warrant:
It is a security that provides its holder with an entitlement of buying the underlying shares of a corporation at a price fixed by it.
Speculative premium:
It is the difference in between the price at which a bond is currently trading and its minimum or intrinsic value.
c.
To calculate: The percentage rise in the warrant price and the stock price if one purchases them at earlier stated price and explain their relationship.
Introduction:
Warrant:
It is a security that provides its holder with an entitlement of buying the underlying shares of a corporation at a price fixed by it.
Stock price:
The highest price of one share of a company that an investor is willing to pay is termed as the share’s price. It is the current price used for the trading of such shares.
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