Series 7 practice questionmediumEquity Securities — Warrants
Which of the following statements BEST distinguishes warrants from rights?
- AWarrants are typically issued with a shorter expiration period than rights
- BWarrants are issued below the current market price of the stock
- CWarrants have a longer expiration period and are exercisable above the current market price at issuance✓ Correct answer
- DWarrants can only be exercised by institutional investors
Explanation
Why C — Warrants have a longer expiration period and are exercisable above the current market price at issuance
Warrants typically have longer expiration periods (often years or even perpetual) and have exercise prices set above the current market price at the time of issuance. Rights, by contrast, expire in a short period (usually 30-45 days) and have subscription prices set below the current market price to encourage exercise.
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