CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

The major differences between a warrant and a call option are ______.

I. warrants are contracts outside of the firm while options are within the firm
II. warrants have long maturities while options are usually short maturities
III. warrant exercise dilutes the value of equity while option exercise does not
A. I and II
B. II and III
C. I and III

User Contributed Comments 6

User Comment
george2006 This answer is wrong. Both warrant and call options can dilute the value of common stock by increase # of float shares outstanding.

Another difference between them is the issuer.
nike Options don't have the dilutive effect. It does not increase or decrease the number of shares outstanding. It's between you and me and has nothing to do with the issuing company.

the answer is correct.
mullrich I was thinking in terms of employee stock options, which would dilute shares outstanding. I guess they're referencing other types of options, in which case the answer does make sense.
prachirp even I thought about employee options.I think they are talking about options to buy or sell.
Very tricky
pooji if you recognized that warrants are contracts within the firm, then by process of elimination you know the answer is b
Mikehuynh Read the question again and you will see that answer b is correct, george2006. It is call option not stock option
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