Question: The Gifford Investment Company bought 100 Cable Corporation warrants one year ago and would like to exercise them today. The warrants were purchased at $30 each, and they expire when trading ends today. (Assume there is no speculative premium left.) Cable Corp. common stock is selling today for $60 per share. The exercise price is $36, and each warrant entitles the holder to purchase two shares of stock, each at the exercise price.
a. If the warrants are exercised today, what would Gifford's total profit or loss be?
b. What is Gifford's percentage rate of return?