The RJN Corporation has issued warrants where each warrant offers the holder the right to purchase one share of RJN's common stock for $20 per share. The warrants are exercisable anytime within the next five years. Chelsea purchases 80 warrants for $2 each. Three years after the purchase, the market price of RJN common stock has risen to $25 per share. Chelsea exercises the warrants and immediately sells the RJN stock at the market price. The result of these transactions is that Chelsea has realized
A) a net short-term capital gain of $400.
B) a net long-term capital gain of $400.
C) a net long-term capital gain of $240.
D) a net short-term capital gain of $240.
The RJN Corporation has issued warrants where each warrant offers the holder the right to purchase one share of RJN's common stock for $20 per share. The warrants are exercisable anytime within the next five years. Chelsea purchases 80 warrants for $2 each. Three years after the purchase, the market price of RJN common stock has risen to $25 per share. Chelsea exercises the warrants and immediately sells the RJN stock at the market price. The result of these transactions is that Chelsea has realizedA) a net short-term capital gain of $400.
B) a net long-term capital gain of $400.
C) a net long-term capital gain of $240.
D) a net short-term capital gain of $240.
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