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Unformatted text preview: ch24 Student: _______________________________________________________________________________________ Multiple Choice Questions 1. A warrant gives the owner: A. the obligation to sell securities directly to the firm at a fixed price for a specified time. B. the right to purchase securities directly from the firm at a fixed price for a specified time. C. the obligation to purchase securities directly from the firm at a fixed price for a specified time. D. the right to sell securities directly to the firm at a fixed price for a specified time. E. None of the above. 2. Warrants are most often issued in combination with: A. new publicly placed common stock. B. new privately placed common stock. C. new publicly placed debt. D. new privately placed debt. E. preferred stock. 3. An "equity kicker" most often refers to a: A. bond with conversion privileges. B. preferred stock offering with conversion privileges. C. warrant. D. lettered common stock. E. None of the above. 4. Warrants are similar to traded options except: A. only warrants have exercise prices. B. only warrants depend on changes in the underlying stock to determine value. C. warrants affect the number of shares outstanding. D. Both A and C. E. Both A and B. 5. BrightView Windows issued warrants with an exercise price of $17. BrightView's common stock currently sells for $20 per share. The warrants are: A. in the money. B. out of the money. C. valuable. D. not very valuable. E. Both A and C. 6. Warrants are similar to options, in that the value of the warrant is limited by: A. expiring worthless if the stock price is below the total warrant exercise price. B. the trading capabilities of the exchange used. C. the price of the underlying stock divided by the number of warrants needed to purchase a share. D. Both A and C. E. Both B and C. 7. Which of the following would not describe the difference between warrants and call options? A. Warrants are issued by firms whereas call options are issued by individuals. B. Call options have an exercise price whereas warrants do not. C. Exercising of warrants creates dilution whereas exercising all options does not. D. When call options are exercised existing shares trade hands whereas if warrants are exercised new stock must be issued. E. None of the above. 8. Two major differences between a warrant and a call option are: A. warrants are contracts outside of the firm while options are within the firm. B. warrants have long maturities while options are usually short maturities. C. warrant exercise dilutes the value of equity while option exercise does not. D. Both A and C. E. Both B and C. 9. Concerning warrants and call options, which of the following statements generally is correct?...
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This note was uploaded on 12/21/2011 for the course NIKA 101 taught by Professor Temur during the Spring '11 term at Acton School of Business.
- Spring '11