Solved: Find the intrinsic value of the warrant, Finance Basics

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Find the intrinsic value of the warrant

Problem:

The People Power Corp. currently has a common stock selling for $15 per share. Warrants are also available. Three warrants entitle the holder to purchase one share of common stock for $9. Warrants are currently selling for $3.

A. How much would you have to spend to buy one share of stock using the warrants?

B. What is intrinsic value of the warrant?

C. What is speculative premium on this warrant?

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Finance Basics: Find the intrinsic value of the warrant

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