Question: Preston Toy Co. has warrants outstanding that allow the holder to purchase a share of stock for $12 (exercise price). The common stock is currently selling for $20, while the warrant is selling for $11.65 per share.
a. What is the intrinsic (minimum) value of this warrant? (Do not round intermediate calculations and round your answer to 2 decimal places.)
b. What is the speculative premium on this warrant? (Do not round intermediate calculations and round your answer to 2 decimal places.)