Question
Dustin Electronics, a major producer of transistors, has outstanding warrants that are exercisable at SHs40 per share and entitle holders to purchase 3 shares
Dustin Electronics, a major producer of transistors, has outstanding warrants that are exercisable at SHs40 per share and entitle holders to purchase 3 shares of common stock. The warrants were initially attached to a bond issue to sweeten the bond. The common stock of the firm is currently selling for SHs45 per share. Required: i. Calculate the theoretical of Dustin's warrants. ii. Comment on the general relationship between the theoretical and the market values of a warrant. (9 marks)
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