Series 7 practice questionmediumEquity Securities — Warrants — Attached to Bonds
Warrants are most commonly issued:
- AAs standalone securities in an IPO
- BIn connection with stock splits
- CBy the SEC to regulate trading activity
- DAs sweeteners attached to bond issues or preferred stock to make them more marketable✓ Correct answer
Explanation
Why D — As sweeteners attached to bond issues or preferred stock to make them more marketable
Warrants are typically attached to bond or preferred stock offerings as equity kickers (sweeteners) to make the underlying security more attractive to investors. By offering the potential for capital appreciation through the warrant, issuers can often offer a lower coupon rate on the bond. Once issued, warrants are usually detachable and can trade separately.
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