Assuming Everything Else Is Constant, When a Stock Goes Ex-Rights

question 2

Multiple Choice

Assuming everything else is constant, when a stock goes ex-rights its price should:

• A) decrease since the investor who purchases the shares is losing an option.
• B) increase since the corporation no longer has the right to force the stockholder to convert.
• C) remain the same since an efficient market would anticipate this change.
• D) increase since the investor who purchases the shares is gaining an option.

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Definitions:

Common Sense

A practical and basic level of understanding, reasoning, or knowledge that is easily understood and shared by nearly all people.

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