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4 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 9) Warrants generally: A) cannot be detached. B) expire within 30 days. C) remain attached to their original security until the expiration date. D) increase in value when the underlying stock price decreases. E) have longer maturity periods than calls. Answer: E Difficulty: 1 Easy Section: 24.2 The Difference between Warrants and Call Options Topic: Warrants Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Concerning warrants and call options, which one of the following statements generally is correct? A) The issue procedures for both are quite similar. B) When a call option is exercised, the firm must issue new stock. C) When a warrant is exercised, existing stock changes hands. D) Exercise of a call option does not affect share value but warrant exercise does. E) The issuance of a call option generally decreases share value. Answer: D Difficulty: 1 Easy Section: 24.2 The Difference between Warrants and Call Options Topic: Warrants Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Which one of the following would harm the financial position of a warrant holder? A) A 3-for-1 stock split B) A 20 percent stock dividend C) A large cash dividend D) A listing of the warrants on the NYSE E) A reverse stock split Answer: C Difficulty: 1 Easy Section: 24.2 The Difference between Warrants and Call Options Topic: Warrants Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation