FINRA Series 7 – General Securities Representative — Question 9

A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering.
What subscription ratio is the corporation establishing for each new share?

Answer options

Correct answer: A

Explanation

The correct answer is A, as the subscription ratio is determined by dividing the total number of existing shares by the new shares being issued. In this case, with six million existing shares and one million new shares, the ratio is 6 rights per share. Options B, C, and D are incorrect because they do not accurately reflect the relationship between existing and new shares.