When comparing rights and warrants for XYZ Corporation common stock, what is true?

The key distinction between rights and warrants lies in their purpose and benefits to shareholders. Rights are typically issued to existing shareholders, allowing them the opportunity to purchase additional shares at a specified price, thereby enabling them to maintain their ownership percentage in the company. This is particularly important when the company is looking to raise additional capital, as it prevents dilution of their existing investment.

On the other hand, warrants are long-term options offered by the company that allow the holder to buy stock at a predetermined price. They can serve to attract new investors because they can offer the potential for profit in the future as the company grows. This characteristic makes warrants appealing for those who may want to invest in a company's future success without purchasing shares outright at the time of issuance.

In this context, the correct choice accurately reflects the roles of rights and warrants in financial strategy, illustrating that rights protect existing shareholders' stakes, while warrants are often designed to entice new investors by offering a long-term opportunity to acquire shares at favorable conditions.

The other choices present inaccurate or less relevant comparisons. For instance, the claim that both are issued to new investors only overlooks the fundamental purpose of rights, which are specifically for existing shareholders. Similarly, the assertion about the trade period of warrants and the frequency of