Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
What is ex-rights day?
Expert Solution
Solution:
When the company announced rights issue for the existing shareholders of the company to participate in the offering having the entitlement to receive or renounce the right to other in lieu of paying the dividend from accumulated profits so as to increase the shareholding pattern and keeps the same amount of money invested in the company.
During the entitlement of rights issue, the stock price of the company trades at cum-right which means actual price plus rights entitlement until the record date for the ex-right.
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