Which statement correctly distinguishes between warrants and rights?

The statement that indicates warrants are long-term financial instruments, while rights are short-term, accurately reflects the typical characteristics of these two financial instruments.

Warrants are often issued for a longer duration, sometimes lasting for several years, allowing the holder to purchase shares at a predetermined price. This extended period provides investors the opportunity to benefit from potential appreciation in the company’s stock over time.

In contrast, rights are typically short-term instruments that are offered in conjunction with an existing shareholding. They allow current shareholders to purchase additional shares at a discounted price, usually within a specific timeframe, often ranging from a few weeks to a couple of months. This brief window emphasizes the urgency and immediate nature of rights offerings to raise capital quickly.

Other options may provide misleading or inaccurate characterizations, such as incorrectly categorizing the nature of ownership or the exclusivity of who can be offered these instruments. Understanding the duration and purpose of warrants and rights is essential for differentiating between them.