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A customer owns 400 shares of ABC stock. ABC is having a rights offering where 20 rights are needed to subscribe to 1 new share. How many new shares can the customer purchase through this rights offering
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A customer owns 400 shares of ABC stock. ABC is having a rights offering where 20 rights are needed to subscribe to 1 new share. How many new shares can the customer purchase through this rights offering

User Lila
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Answer:

20 new stocks

Step-by-step explanation:

each stockholder should receive 1 right for every stock that he/she owns, so this particular investor owns 400 rights. Since he/she needs 20 rights to subscribe to 1 new stock, then the total number of stocks that he/she can buy = 400 / 20 = 20.

Many corporations hand out preemptive rights to their stockholders, which means that whenever new stocks are issued, they will be able to purchase them before any outside investor does.

User Sortas
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