Which of the following statements concerning warrants is correct Warrant usually are issued below market price,...
Which of the following statements concerning warrants is correct Warrant usually are issued below market price, so they have the value at the time of issue Warrants are usually shorter in duration than rights and are usually more costly Warrants are popular because the investors receive higher interest yield on the bonds An investor pays a subscription price and receives stock at the time warrants are exercised
Homework Answers
Answer is Warrant usually are issued below market price, so they have the value at the time of issue.
Warrantees gives the shareholder right but not the obligation to buy certain number of securities at the amount of price before a certain time. Warranty must have a minimum value, considering the warranties to buy 100 shares of the company at the value of $40 per share at any point of time in the next five years. If the price of the share increases to $80 during the time of the warranty, then warrant holder can buy share at $40 each from the company and can again sell in the open market for $80 each as the minimum value of the warranty is set to $40 each.
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Which of the following statements concerning warrants is correct
Warrant usually are issued below market price,...
Convertible debt and straight debt issued with warrants are similar securities, because both are debt securities...
Convertible debt and straight debt issued with warrants are similar securities, because both are debt securities that represent potential equity claims on the issuer's assets. In fact, convertible debt can be thought of as straight debt plus nondetachable warrants. However, several important distinctions do exist. Use the following table to indicate whether the characteristic listed refers to convertible bonds or to stock warrants: Characteristic Convertible Bonds Debt with Warrants These securities typically have a shorter maturity When exercised, new claims...
Question text Which of the following statements about convertibles is most CORRECT? Select one: a. Investors...
Question text Which of the following statements about convertibles is most CORRECT? Select one: a. Investors are willing to accept a lower interest rate on a convertible than on otherwise similar straight debt because convertibles are less risky than straight debt. b. At the time it is issued, a convertible's conversion (or exercise) price is generally set equal to or below the underlying stock's price. c. The coupon interest rate on a firm's convertibles is generally set higher than the...
Which of the following statements is CORRECT? a. The market price of a bond will always...
Which of the following statements is CORRECT? a. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond’s required return remains constant. b. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices. c. The total yield on a bond is derived from dividends plus changes in the price of the bond. d. Bonds are generally regarded...
The stockholders’ equity section of Blue Inc. at the beginning of the current year appears below....
The stockholders’ equity section of Blue Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 981,000 shares, 277,000 shares issued and outstanding $2,770,000 Paid-in capital in excess of par—common stock 634,000 Retained earnings 534,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 90,000 rights. Ten rights are needed to buy one share of stock at $31. The rights were void after 30 days. The market price...
1. Indicate which of the following statements are false. On Friday, 10,000 bonds issued by Glorious...
1. Indicate which of the following statements are false. On Friday, 10,000 bonds issued by Glorious Vending were bought by a variety of investors for $1,000 per bond. If Glorious Vending received $10 million from the sale of these bonds, then the 10,000 bonds were more likely sold on the primary market than the secondary market. If Donatello Company is performing very poorly and the firm fails to make promised coupon payments to bondholders, then the bondholders can take legal...
The stockholders’ equity section of Carla Inc. at the beginning of the current year appears below....
The stockholders’ equity section of Carla Inc. at the beginning
of the current year appears below.
Common stock, $10 par value, authorized 1,050,000 shares,
274,000 shares issued and outstanding
$2,740,000
Paid-in capital in excess of par—common stock
589,000
Retained earnings
566,000
During the current year, the following transactions occurred.
1.
The company issued to the stockholders 96,000 rights. Ten
rights are needed to buy one share of stock at $29. The rights were
void after 30 days. The market price...
The stockholders' equity section of Monty Inc. at the beginning of the current year appears below....
The stockholders' equity section of Monty Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 941,000 shares, 272,000 shares issued and outstanding $2,720,000 Paid-in capital in excess of par-common stock 645,000 Retained earnings 600,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 108,000 rights. Ten rights are needed to buy one share of stock at $32. The rights were void after 30 days. The market price...
Name Date Principles of Finance Chapters 1 & 2 Week 6 11. Which of the following...
Name Date Principles of Finance Chapters 1 & 2 Week 6 11. Which of the following statements is correct? a. A warrant is basically a long-term option that enables the holder to sell common stock back to the firm at an agreed upon price, at a specified time in the future. b. Generally, warrants are distributed along with preferred stock in order to make the preferred stock less risky. c. If a company issuing coupon paying debt wanted to reduce...
The stockholders' equity section of Skysong Inc, at the beginning of the current year appears below....
The stockholders' equity section of Skysong Inc, at the beginning of the current year appears below. Common stock, $10 par value, authorized 1,043,000 shares, 321,000 shares issued and outstanding Pald-in capital in excess of par-common stock Retained earnings $3,210,000 562,000 624,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 109,000 rights. Ten rights we needed to buy one share of stock at $30. There were old after 30 days. The market price of...
Which of the following statements is FALSE? Select one: A. In a perfect market without other...
Which of the following statements is FALSE? Select one: A. In a perfect market without other frictions, insurance companies should compete until they are just earning a fair return and the NPV from selling insurance is zero. The NPV is zero if the price of insurance equals the present value of the expected payment; in that case, we say the price is actuarially fair. B. Because insurance reduces the risk of financial distress, it can relax this tradeoff and allow...
Convertible debt and straight debt issued with warrants are similar securities, because both are debt securities that represent potential equity claims on the issuer's assets. In fact, convertible debt can be thought of as straight debt plus nondetachable warrants. However, several important distinctions do exist. Use the following table to indicate whether the characteristic listed refers to convertible bonds or to stock warrants: Characteristic Convertible Bonds Debt with Warrants These securities typically have a shorter maturity When exercised, new claims...
The stockholders’ equity section of Carla Inc. at the beginning
of the current year appears below.
Common stock, $10 par value, authorized 1,050,000 shares,
274,000 shares issued and outstanding
$2,740,000
Paid-in capital in excess of par—common stock
589,000
Retained earnings
566,000
During the current year, the following transactions occurred.
1.
The company issued to the stockholders 96,000 rights. Ten
rights are needed to buy one share of stock at $29. The rights were
void after 30 days. The market price...
The stockholders' equity section of Monty Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 941,000 shares, 272,000 shares issued and outstanding $2,720,000 Paid-in capital in excess of par-common stock 645,000 Retained earnings 600,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 108,000 rights. Ten rights are needed to buy one share of stock at $32. The rights were void after 30 days. The market price...
Name Date Principles of Finance Chapters 1 & 2 Week 6 11. Which of the following statements is correct? a. A warrant is basically a long-term option that enables the holder to sell common stock back to the firm at an agreed upon price, at a specified time in the future. b. Generally, warrants are distributed along with preferred stock in order to make the preferred stock less risky. c. If a company issuing coupon paying debt wanted to reduce...
The stockholders' equity section of Skysong Inc, at the beginning of the current year appears below. Common stock, $10 par value, authorized 1,043,000 shares, 321,000 shares issued and outstanding Pald-in capital in excess of par-common stock Retained earnings $3,210,000 562,000 624,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 109,000 rights. Ten rights we needed to buy one share of stock at $30. There were old after 30 days. The market price of...
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