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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.

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Solution
5 (1 Ratings )

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