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problem: Suppose you can purchase a warrant for $5 that gives you the option to buy one share of common stock at $14 per share. The stock is currently selling at 16 dollar per share.

[A] find out the intrinsic value of the warrant?

[B] find out the speculative premium on the warrant?

[C] Suppose if the stock rises to $24 per share & the warrant sells at its theoretical value without a premium, what will be the percentage raise in the stock price and the warrant rate if you bought the stock & the warrant at the rates stated above? describe the relationship.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M920164

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