The current market price of a company's shares is $10. The company is planning to make a 1 for 10 rights issue at a subscription price of $8. You hold 100 shares at the time the rights issue is to be made. If you exercise your rights, what is the total number of shares you will now own?

Question

Quizplus · Accepted Answer

A 1 for 10 rights issue means that for every 10 shares held, the shareholder is entitled to subscribe to 1 additional share at the subscription price of $8. Since the shareholder holds 100 shares, they are entitled to subscribe to 100/10 = 10 additional shares. The total number of shares the shareholder will now own is 100 + 10 = 110.

The Current Market Price of a Company's Shares Is $10