The Whipple Corporation currently has common stock selling for $40 per share on the National Stock Exchange. Warrants are also available entitling the warrant holder the option of purchasing 1 share of common stock for every 3 warrants held. The exercise price is $32 per share. The warrants are currently selling for $7 per warrant.

a) How much would you have to spend to buy one share of stock using the warrants? Does this make sense?

b) What is the intrinsic value of the warrant?

c) What is the speculative premium on this warrant?