Assuming Everything Else Is Constant, When an Equity Goes Ex-Rights

question 37

Multiple Choice

Assuming everything else is constant, when an equity goes ex-rights its price should:

• A)decrease since the shareholder is losing an option.
• B)increase since the corporation no longer has the right to force the shareholder to convert.
• C)remain the same since an efficient market would anticipate this change.
• D)move up or down depending on whether a small investor wanted to exercise his/his rights.
• E)None of the above.

---

Definitions:

Net Exports

The net difference between a nation's total exports and its total imports, indicating the trade balance.

Net Capital Outflow

The difference between the domestic country's investment in foreign countries and the foreign investments in the domestic country.

Domestic Investment

The total spending within a country on capital goods, which are used to produce other goods or services.

Exchange Rates

The value of one currency for the purpose of conversion to another, reflecting the market's opinion of the relative worth of currencies.