SIE practice questionmediumRights vs Warrants
All of the following are characteristics of stock rights EXCEPT:
- AThe subscription price is typically above the current market price✓ Correct answer
- BThey are transferable and can be traded on the secondary market
- CThey are short-term instruments, typically expiring in 30-90 days
- DThey are issued to existing shareholders
Explanation
Why A — The subscription price is typically above the current market price
Stock rights have a subscription price BELOW the current market price to incentivize existing shareholders to participate. Warrants, by contrast, have exercise prices above market price at issuance. Rights are indeed short-term (A), issued to existing shareholders (B), and transferable (D).
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