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.

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Definitions:

Increase in Quantity

A rise in the amount of a certain good or service produced or supplied in the market.

Adoption of New Technology

The process by which new tools, systems, or services are embraced and utilized by individuals, businesses, or organizations.

Market for Cars

The economic environment involving the buying, selling, and production of automobiles.

Economics Major

An Economics Major is an academic program focusing on the study of how societies use resources to produce goods and services and distribute them among populations.