What does a warrant allow the holder to do?

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A warrant is a financial instrument that provides the holder the right, but not the obligation, to purchase a company's stock at a predetermined price, known as the exercise or strike price, after a specified period or at a specific time in the future. This characteristic makes warrants similar to options, although they typically have longer expiration periods.

The primary purpose of a warrant is to allow the holder an opportunity to gain exposure to potential upside in a company’s stock price. If the stock price rises above the exercise price, the holder can exercise the warrant, buy the shares at the lower agreed price, and then potentially sell them at the current higher market price, leading to a profit.

This contrasts with the other options, which describe different financial instruments or rights. For instance, receiving a fixed dividend is associated with owning shares of stock, not holding a warrant. Selling stock at market value pertains to the selling of existing shares, which is not what a warrant entitles the holder to do. Converting stock into bonds refers to a different concept altogether, typically associated with convertible securities where a bondholder can convert their bonds into a predetermined number of shares of the issuing company.

Overall, a warrant specifically allows the holder to acquire stock at a specified time and at

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