Explain the following limits on the prices of warrants: a. If the stock price is below the

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Explain the following limits on the prices of warrants:

a. If the stock price is below the exercise price of the warrant, the lower bound on the price of a warrant is zero.

b. If the stock price is above the exercise price of the warrant, the lower bound on the price of a warrant is the difference between the stock price and the exercise price.

c. An upper bound on the price of any warrant is the current value of the firm’s stock.

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Corporate Finance

ISBN: 978-0077861759

10th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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Question Posted: Aug 28, 2014 10:29 AM

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Explain the following limits on the prices of warrants: a. If the stock price is below the

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a If the stock price is less than the exercise price of the warrant at expiration the warrant is wor...View the full answer

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