Solution:

The share warrant is a financial instrument because it gives the holder the right to acquire an equity share of the company at a specified price and time. The warrant allows the holder to benefit from any future increase in the price of the equity share.

To calculate the fair value of the share warrant, we can use the Black-Scholes model. The inputs required for the calculation are:

• Current market price of equity share = $60
• Exercise price of the warrant = $50
• Time to expiration = 1 year
• Risk-free rate = 2%
• Expected volatility of the equity share = 20%

Using these inputs, the fair value of the warrant can be calculated as follows:

Fair value of warrant = $60 * N(d1) - $50 * e^(-0.02*1) * N(d2)

Where:

d1 = (ln(60/50) + (0.02 + 0.2^2/2)*1) / (0.2 * sqrt(1))

d2 = d1 - 0.2 * sqrt(1)

N(d1) and N(d2) are the cumulative probabilities of the standard normal distribution.

Plugging in the values, we get:

d1 = 0.8344

d2 = 0.6144

N(d1) = 0.7993

N(d2) = 0.7273

Therefore, the fair value of the share warrant is:

Fair value of warrant = $60 * 0.7993 - $50 * e^(-0.02*1) * 0.7273 = $12.13

Hence, the share warrant is a financial instrument with a fair value of $12.13.