SIE Exam Question 188: Answer and Explanation

Question: 188

Which of the following is an option issued by a given company to buy one or more shares of common stock in that company at a price initially above the market price?

• A. Right
• B. Warrant
• C. Call
• D. Put

Correct Answer: B

Explanation:

A warrant is an option issued by a given company to buy one or more shares of common stock in that company at a price initially above the market price. A right is an option to buy one or more shares of common stock in a given company when new shares are issued, at a price initially below the market price. An option with the right to buy is known as a call option, and an option with the right to sell is known as a put option. Calls and puts are contracts made between participants in the marketplace rather than issued by a company.