What type of investment provides the owner the right to buy stock at a set price and is often attached to another security?

A warrant is a type of investment that gives the owner the right to purchase a company's stock at a specified price, known as the exercise price, within a certain timeframe. Warrants are often issued alongside other securities, such as bonds or preferred stock, as an incentive to enhance the attractiveness of the main investment. This means that when an investor buys a security that comes with a warrant, they gain the future option to buy the company's stock at the predetermined price, providing the potential for profit if the stock's market price rises above that set price.

This feature makes warrants distinct and valuable, as they provide an opportunity for capital appreciation through the ownership of equity at a fixed cost. The relationship between warrants and other securities helps companies to raise capital more effectively because investors are attracted to the potential upside of warrants alongside their primary investment.