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Stock warrants (which are essentially the same as stock options) allow a holder to purchase the issuer's stock at an exercise price within a defined period Warrants are an attractive way to allow lender to potentially increase its overall return on debt otherwise issued at lower interest rate. a return on debt and equity, or a return on stockholders' equity. The relation between the return on equity and the return on debt also is based on the assumption that arbitrage equalizes the expected real rates of return on the two, apart from a possible risk premium. |
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