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CS Executive · Capital Market and Securities Laws · Basics of Capital Market

Rohan holds a security of Vikram Steels Ltd. that gives him the right, but not the obligation, to subscribe to equity shares at a fixed price during a stated period, and it was issued attached to a bond. Which instrument is this?

The instrument is a warrant. It gives the holder an option, not an obligation, to buy equity shares at a predetermined price within a specified period, and it is often attached to a bond or debenture issue as a sweetener. The other instruments carry no such subscription right.

  1. AWarrantCorrect
  2. BZero coupon bond
  3. CPreference share
  4. DCommercial paper

Explanation

A warrant is an option giving the holder the right to subscribe to equity at a fixed price within a period, often issued along with bonds or other securities. A zero coupon bond pays no interest and has no subscription right. Preference shares and commercial paper do not carry such an option.

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