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Question 35 Not yet answered Why might an investor select a stock with warrants ? - 1. The exercise price is lower than the mQuestion 37 An investor writes two ABC May 30 uncovered calls for $2.40. At expiry the stock price is $35 and the writer is a

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Answer #1

An investor might select a stock with warrants because -

Answer c) i and iii

Because warrants allow you to buy a specified amount of equity shares at a price different than market price of share and if he things the share will be at higher price in future he will buy the warrant now.

The answer to 2nd question is a) part Loss of $520 because the writer of the call option losses indefinitely if the price of share increases and here the price has increased by $5 but the writer also got premium per share which is $2.4 so net loss is $2.6 per share

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