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Investment advice and corporate finance
Module 12Investment Management and Corporate FinanceA warrant gives the right to buy one share at RM1.20. The share trades at RM1.50 and the warrant at RM0.45. What are the warrant's intrinsic value and premium?
Intrinsic value = share price − exercise price = 1.50 − 1.20 = RM0.30. Premium = (warrant price + exercise price − share price) ÷ share price = (0.45 + 1.20 − 1.50) ÷ 1.50 = 10%: buying the share via the warrant costs 10% more than buying it now. RM0.15 is the time value, not the intrinsic value. 30% is the warrant price as a percentage of the share price, not the premium. 0% treats the whole warrant price as intrinsic value. Source: SIDC Module 7 Study Outline (Jul-Dec 2026) Topic 5 Equity Markets; Bodie, Kane and Marcus, Investments, chapters on equity valuation (as at October 2026).
Confusing intrinsic value with the warrant price, or time value with intrinsic value.
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