A customer owns 210 shares of ABC common stock. ABC declares a rights offering, with the terms being that for every 20 rights tendered, a shareholder may purchase one additional share at $20 per share. Any fractional rights holding may be rounded up to buy an additional share. If this shareholder wishes to subscribe, which statement is TRUE?

Question

Business

Jacoby Welch

6 December, 15:32

A customer owns 210 shares of ABC common stock. ABC declares a rights offering, with the terms being that for every 20 rights tendered, a shareholder may purchase one additional share at $20 per share. Any fractional rights holding may be rounded up to buy an additional share. If this shareholder wishes to subscribe, which statement is TRUE?

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Answers (1)

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Cheyanne Daugherty · Answer 1

B. The shareholder can buy a maximum of 11 shares by paying $220

Explanation:

There is an option below the question ask for details:

The computation is shown below:

First, we have to determine the fraction value which is shown below:

= Total shares : rights shares

= 210 shares : 20 shares

= 10.5 shares rounded off = 11 shares

Now for additional shares, the total value would be

= Number of shares * per share value

= 11 shares * $20

= $220