- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 1. Derivative Instrument and Derivative Market Features
- Subject 1. Derivative Features and Underlyings
CFA Practice Question
Which of the following statements regarding a warrant is FALSE?
B. A warrant is a call option to buy shares of stock.
C. A warrant does not represent ownership in the company.
D. A warrant is issued by an investor expecting the price of the underlying stock to rise.
A. Most warrants can be exercised anytime within their specified lives, which typically runs between 5 and 10 years.
B. A warrant is a call option to buy shares of stock.
C. A warrant does not represent ownership in the company.
D. A warrant is issued by an investor expecting the price of the underlying stock to rise.
Correct Answer: D
Warrants are issued by corporations, not investors. They are a type of call option that will allow the holder to profit if the underlying stock price rises.
User Contributed Comments 4
| User | Comment |
|---|---|
| To-be-CFA | Warrants are issued by the corporations. |
| GBolt93 | Would a corporation also not want to issue a warrant if it expected the underlying stock price to rise? |
| Rm178234 | A is also false. Stock needs to be above the warrant exercise price in order to be exercised. |
| Haoran | @Rm178234: they don't have to be above exercise price to be executed. The owner will not make money though. |