Question
You can buy a warrant for $7.00 that gives you the option to buy one share of common stock at $17.50 per share. The stock
You can buy a warrant for $7.00 that gives you the option to buy one share of common stock at $17.50 per share. The stock is currently selling at $15.00 per share. (Leave no cells blank - ensure that "0" is entered wherever required.)
a. What is the intrinsic (minimum) value of the warrant? (Round the final answer to 1 decimal place.)
Intrinsic value $
b. What is the speculative premium on the warrant? (Round the final answer to 2 decimal places.)
Speculative premium $
c. If the share price rises to $32.00 per share and the warrant sells at its intrinsic value plus a speculative premium of $1.00, what will be the percentage increase in the share price and the warrant price if you bought a share and the warrant at the prices stated above, $15.00 and $7.00? (Do not round the intermediate calculations. Round the final answer to 2 decimal places.)
Percentage increase
Share %
Warrant %
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