A firms common shares currently trade at $20 per share. The firm has warrants outstanding that entitle
Question:
A firm’s common shares currently trade at $20 per share. The firm has warrants outstanding that entitle the holder to purchase two shares at an exercise price of $18 per share. The expiry date is two years from today.
a. Calculate the minimum value (floor value) for the warrants.
b. Show that the warrants cannot trade at a price that is below this floor value.
c. Show the percentage change in the floor value of the warrants given a 10 percent change in the market price of the shares.
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a We have share price S 20 Exercise price of the warrants X 18 Number ...View the full answer
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Related Book For 
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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