A warrant has an exercise price of $40, and the current stock price is $38. An investor holding this option will purchase the stock only if: A) the dividend yield on the stock exceeds 10%. B) the stock price falls below $38. C) the stock price rises above $40. D) the stock price falls to $20 or below

C) if the stock price rises about $40..the market is $38, but you are holding warrants valued at $40...this means if you sold them you would lose $2/warrant as no one is willing to pay more than $38. Dividends have nothing to do with this question, and the price falling below $38 makes the matter worse...same thing with it falls below $20.think of warrants as a call option...you have the right to purchase these stocks under the warrant at the price listed on the warrant. Unlike Call Options, warrants are issued and guaranteed by the underlying company (warrants are a derivative) whereas Options are traded through B/Ds. Hope this helps.