SIE Exam Question 141: Answer and Explanation

Question: 141

Which of the following is NOT true regarding the options of an investor who possesses a warrant to purchase common stock?

• A. The investor must exercise the warrant before the stock’s price rises above the subscription price.
• B. The investor may sell the warrant to another investor.
• C. The investor may exercise the warrant at any time prior to expiration to purchase common stock at the warrant's subscription price.
• D. all of the above statements are true.

Correct Answer: A

Explanation:

A warrant is valid for a set period of time, and does not become invalid because of movement in the market price of the stock. An investor who holds a warrant may sell the warrant to another investor or exercise the warrant to purchase common stock at the subscription price.