Series 7 Exam Question 16: Answer and Explanation

Question: 16

All of the following are TRUE of warrants EXCEPT

• A. They can trade separately
• B. They are usually issued to make a stock or bond offering more attractive to investors
• C. They provide holders with a perpetual interest in the underlying security
• D. None of the above

Correct Answer: C

Explanation:

C. Warrants are often issued with stock and bond offerings more attractive. (When issued together, they're called a unit.) Warrants give the holders the right to buy stock from the issuer at a specific price. Warrants are marketable securities, meaning they can trade separately. They are long term and sometimes, but not always, perpetual (no end date), so answer C is the exception.