SIE practice questionmediumRights Offerings
Which statement about stock rights (subscription rights) is TRUE?
- ARights may only be exercised, never sold on the secondary market
- BRights are issued to existing shareholders and allow purchase of new shares below market price✓ Correct answer
- CRights give holders preference in liquidation over preferred stockholders
- DRights are typically issued with a long-term expiration of 5 to 10 years
Explanation
Why B — Rights are issued to existing shareholders and allow purchase of new shares below market price
Stock rights are issued to existing shareholders, allowing them to buy new shares at a subscription price below the current market price. Rights are short-term instruments, typically expiring in 30-90 days (not 5-10 years — that describes warrants). Rights ARE transferable and can be sold on the secondary market.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Equity Securities questions