CMFAS RES 1A Securities Dealing Practices & Skills question: company warrant

CMFAS RES 1ASecurities Dealing Practices & Skills

A share option or company warrant differs from the underlying share in that it:

A Carries voting rights and dividends, as it is simply a class of ordinary share
B Pays a fixed annual dividend to the holder until the holder chooses to exercise it
C Has no expiry date, so it can be exercised at any time in the future
D Gives a right linked to the underlying on set terms and expires on a fixed date

Show the answer and explanation

Answer: D. Gives a right linked to the underlying on set terms and expires on a fixed date

A warrant/option confers a right relating to the underlying (e.g. to subscribe or a payoff linked to price) on set terms and has an expiry; it is not direct share ownership and typically pays no dividend.

Common mistake

Warrants are time-limited rights linked to the underlying, not the underlying shares themselves.

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CMFAS RES 1A Securities Dealing Practices & Skills question: company warrant

Answer: D. Gives a right linked to the underlying on set terms and expires on a fixed date

Common mistake

Related CMFAS RES 1A questions

CMFAS RES 1A Securities Dealing Practices & Skills question: company warrant

Answer: D. Gives a right linked to the underlying on set terms and expires on a fixed date

Common mistake

Related CMFAS RES 1A questions