Skip to content

NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market

A company has 40 lakh shares outstanding. In a rights issue it offers 1 new share for every 4 held, at Rs 150 per share, when the market price is Rs 200. Assuming full subscription, what is the theoretical ex-rights price per share?

The theoretical ex-rights price is Rs 190. Four existing shares worth Rs 800 plus one new share paid at Rs 150 give a total of Rs 950 for five shares, and dividing 950 by 5 gives Rs 190 per share.

  1. ARs 190Correct
  2. BRs 160
  3. CRs 185
  4. DRs 175

Explanation

For every 4 shares at Rs 200 = Rs 800, add 1 share at Rs 150, so total value is Rs 950 for 5 shares. Ex-rights price = 950/5 = Rs 190. Rs 175 results from averaging 200 and 150 without weights. Rs 160 and Rs 185 do not follow from the weighted calculation.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Securities Market shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Securities MarketFree diagnostic mock

More Introduction to Securities Market questions