Assume in Problem 17 that Cable Corporation common stock was selling for $50 per share when Gifford

Question:

Assume in Problem 17 that Cable Corporation common stock was selling for $50 per share when Gifford Investment Company bought the warrants.

a. What was the intrinsic value of a warrant at that time?

b. What was the speculative premium per warrant when the warrants were purchased? The purchase price, as indicated above, was $30.

c. What would Gifford's total dollar profit or loss have been had they invested the $3,000 directly in Cable Corporation's common stock one year ago at $50 per share? Recall the current value is $60 per share.

d. What would the percentage rate of return be on this common stock investment? Compare this to the rate of return on the warrant computed in Problem 17 b.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...