Reference no: EM131917923

1. Which of the following statements is most correct:

a) One important difference between warrants and convertibles is that convertibles bring in additional funds when they are converted, but exercising warrants does not bring in any additional funds.

b) One important difference between warrants and convertibles is that warrants bring in additional funds when they are exercised but converting bonds does not bring in any additional funds.

c) Both convertible bonds and warrants bring new equity capital into the firm when converted or exercised.

d) Warrants can sometimes be detached and traded separately from the debt with which they were issued, but this is unusual.

e) none of the above

2. Which of the following statements concerning warrants is correct?

a) Warrants are long-term naked options that must be exercised within 10 years after issuance regardless of the firm's common stock price.

b) Warrants are long-term put options that have value because holders can sell the firm's common stock at the exercise price regardless of how low the market price drops.

c) Warrants are long-term call options that have value because holders can buy the firm's common stock at the exercise price regardless of how high the stock's price has risen.

d) Both convertible bonds and bonds with warrants bring new equity capital into the firm when exercised. .

e) none of the above