Question : 16.Price appreciation with a warrant (LO19-4) Assume you can buy : 1553915
16.Price appreciation with a warrant (LO19-4) Assume you can buy a warrant for $6 that gives you the option to buy one share of common stock at $14 per share. The stock is currently selling at $18 per share.
a.What is the intrinsic value of the warrant?
b.What is the speculative premium on the warrant?
c.If the stock rises to $29 per share and the warrant sells at its theoretical value without a premium, what will be the percentage increase in the stock price and the warrant price if you buy the stock and the warrant at the prices stated here? Explain this relationship.