Modern Windows issued warrants for one share per warrant with an exercise price of $21. On May 1, the common stock is selling for $23 a share. The lower and upper limits on the warrant value on this date are:
A) $0 and $23.
B) $0 and $21.
C) $2 and $21.
D) $2 and $23.
E) $21 and $23.
D) $2 and $23.
Explanation: Lower limit = MAX[0,(Stock price ? Exercise price)]
Lower limit = MAX[0,($23 ? 21)]
Lower limit = $2
Upper limit = Stock price
Upper limit = $23
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