Rights Warrants
A company announces a rights offering where shareholders need 5 rights to purchase one new share at $25. The stock is currently trading cum-rights at $32. What is the value of one right?
Using the cum-rights formula: Value = (Market Price - Subscription Price) / (Rights Needed + 1). Value = ($32 - $25) / (5 + 1) = $7 / 6 = $1.17 (rounded). The +1 accounts for the fact that the stock price includes the ri
Complete Analysis & Legal Rationale
Using the cum-rights formula: Value = (Market Price - Subscription Price) / (Rights Needed + 1). Value = ($32 - $25) / (5 + 1) = $7 / 6 = $1.17 (rounded). The +1 accounts for the fact that the stock price includes the right's value.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.