Exam 24: Warrants and Convertibles

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Eastern Shore Merchants has 75,000 shares and 50,000 warrants currently outstanding.A warrant holder can purchase one new share of stock in exchange for four warrants plus $20.The stock is currently selling for $20.60 per share.What would be the gain per new share from exercising the warrants,assuming all warrants are exercised?

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Cooper Industries has 400,000 shares of stock outstanding with a market price of $32 a share.The firm also has 10,000 bonds outstanding with a face value of $1,000 and a conversion price of $40.The bonds mature tomorrow.You currently own 25,000 shares of this stock and no bonds.What percent ownership in the firm should you expect to have after tomorrow?

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Which one of these features applies to call options but not to warrants?

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