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NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions

A company announces a rights issue in the ratio 1:4 at Rs 150 per share. An investor holds 1,000 shares. How many rights shares is the investor entitled to, and what total amount must be paid to subscribe fully?

The investor is entitled to 250 rights shares because a 1:4 ratio gives one new share for every four held, and 1,000 divided by 4 is 250. Paying Rs 150 each, the full subscription costs Rs 37,500.

  1. A250 shares; Rs 37,500Correct
  2. B250 shares; Rs 1,50,000
  3. C400 shares; Rs 60,000
  4. D100 shares; Rs 15,000

Explanation

A 1:4 ratio means 1 new share for every 4 held. 1,000/4 = 250 shares. Payment = 250 x 150 = Rs 37,500. Rs 1,50,000 wrongly multiplies by 1,000 shares instead of 250. 400 shares inverts the ratio.

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