Hanson Toy Co. has warrants outstanding that allow the holder to purchase 1.5 shares of stock per warrant at $25 per share (option price). The common stock is currently selling for $32, while the warrant is selling for $11.75 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.