- CFA Exams
- CFA Exam: Level I 2021
- Study Session 12. Equity Investments (1)
- Reading 36. Market Organization and Structure
- Subject 2. Assets and Contracts
CFA Practice Question
Which of the following statements regarding warrants is FALSE?
B. A warrant is a call option to buy shares of stock.
C. A warrant does not represent ownership in a 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 run 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 a 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.
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