
Fundamentals of Options 255
P R O B L E M S
1. Indian Textiles issued three-year 10% coupon bonds with a
face value of INR 1,000 each on January 1, 2008. Each bond
has two warrants attached to it. e share price of India
Textiles on January 1, 2008, was INR 240. e terms of
warrant issue are:
Number of shares for each warrant 100
Exercise price INR 260
Exercise period March 1 to June 30, 2008.
On June 30, the share price of Indian Textiles is INR 268.
(i) Should the warrant holder exercise the warrant?
(ii) If the warrants are exercised, what will happen?
2. Mumbai Computers issues employee stock options to ne ...