SIE practice questionhardWarrants
A warrant is most likely to be exercised when the:
- ABondholder wishes to convert to common stock
- BMarket price is below the exercise price
- CIssuer is in financial distress
- DMarket price is above the exercise price✓ Correct answer
Explanation
Why D — Market price is above the exercise price
Warrants are only valuable if exercised below current market value. Below-exercise price means it’s worthless; financial distress or bondholder conversion isn’t relevant.
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