Tricki Corp stock sells for $45 rights-on, and the subscription price is $35. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is Tricki's expected price when it begins trading ex-rights?
A) $47.23
B) $44.00
C) $44.09
D) $45.00

Question

Quizplus · Accepted Answer

The expected price when Tricki begins trading ex-rights can be calculated using the formula: $$ \text{Ex-rights price} = \frac{(\text{Market price} \times \text{Number of rights}) + \text{Subscription price}}{\text{Number of rights} + 1} $$ Substituting the given values: $$ \text{Ex-rights price} = \frac{(\$45 \times 10) + \$35}{10 + 1} = \frac{\$450 + \$35}{11} = \frac{\$485}{11} = \$44.09 $$

Tricki Corp Stock Sells for $45 Rights-On, and the Subscription