Question
Hanson Toy Co. has warrants outstanding that allow the holder to purchase 2.5 shares of stock per warrant at $23 per share (option price). The
Hanson Toy Co. has warrants outstanding that allow the holder to purchase 2.5 shares of stock per warrant at $23 per share (option price). The common stock is currently selling for $31, while the warrant is selling for $22.00 per share. (Leave no cells blank - ensure that "0" is entered wherever required.)
a. What is the intrinsic (minimum) value of this warrant? (Round the final answer to 2 decimal places.)
Intrinsic value $
b. What is the speculative premium on this warrant? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Speculative premium $
c. What should happen to the speculative premium as the expiration date approaches?
multiple choice
Speculative premium should decrease.
Speculative premium should increase.
Speculative premium should not change.
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