SIE (Securities Industry Essentials) Practice Exam

A warrant enables the holder to:

1. Sell equity shares at market price

2. Purchase equity shares at a set price from the issuer

3. Exchange equity shares for corporate bonds

4. Trade equity shares on a foreign exchange

The correct answer is: Purchase equity shares at a set price from the issuer

A warrant is a financial instrument that gives the holder the right, but not the obligation, to purchase a specific amount of equity shares from the issuer at a predetermined price within a certain time frame. Therefore, option B is the correct answer as it accurately describes the function of a warrant. Option A is incorrect because a warrant does not give the holder the right to sell equity shares, only to purchase them. Option C is incorrect because a warrant is not used to exchange equity shares for corporate bonds. Option D is incorrect because a warrant is not used to trade equity shares on a foreign exchange.