Question

ABC Corporation has declared a rights offering to stockholders of record on December 10th. Under the offer, shareholders need 10 rights to subscribe to 1 new share at a price of $19. Fractional shares can be rounded up to purchase 1 full share. A customer owning 111 shares wishes to subscribe. The market price of the stock is currently $30. The customer can buy:___________.A. 11 shares for $209B. 12 shares for $228C. 11 shares for $341D. 12 shares for $372

Answer 1

B. 12 shares for $228

Step-by-step explanation:

Based on the information given we were told that shareholders will need 10 rights in order for him/her to subscribe to 1 new share at the amount of $19 and we were still told that the customer who was owning 111 shares as well wishes to subscribe which means that what the customer can buy will be calculated as :

111 / 10 = 11.1 shares approximately 12 shares

Hence,

12 shares × $19

=$228

Which means that the customer can buy 12 shares for the amount of $228