Question

The exercise price of a warrant is $45 per share; current market price of the common...

The exercise price of a warrant is $45 per share; current market price of the common stock is $55; number of shares that can be purchased by exercising the warrant is 5. Calculate the exercise value of the warrant:

  • $5

  • $50

  • $10

  • $0

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Answer #1

Exercise value is the amount saved by purchasing the common stock by exercising warrant rather than buying the stock in open market.

Exercise value = Number of shares [Price in open market- exercise price of warrant]

              = 5 [55 -45]

             = 5 *10

             =50

Correct option is "B"-50

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