SIE Understanding Products and Their Risks Question 4: Answer and Explanation

Question: 4

Which of the following satisfies an anti-dilution provision?

• A. Rights
• B. Warrants
• C. Puts
• D. Calls

Correct Answer: A

Explanation:

A: Rights preserve the right of first refusal so that a stockholder may purchase shares to maintain the same percentage of ownership. Choice B may be offered as an incentive to purchase stocks and bonds. Choices C and D are options that are not typically issued pursuant to an anti-dilution provision.