What is the subscription price of a right currently trading ex - ProProfs Discuss

# What is the subscription price of a right currently trading ex-rights?

The market price of the stock is \$78.50, the intrinsic value of the rights is \$1.25 and 3 rights are needed to subscribe for 1 share.

Asked by Kennedy, Last updated: Feb 16, 2024

#### John Smith

John Smith

\$74.75-to answer this question, one must know what the formula is for calculating the intrinsic value when trading ex rights. from the text:intrinsic value = (market price subscription price) / number of rights to buy 1 sharenormally, you would be given the market price, subscription price and number of rights it takes to buy 1 common share. but in this question, you are given everything except the subscription price. so its a matter of filling in what you know and solving for what you dont know:intrinsic value = (market price subscription price) / number of rights to buy 1 share\$1.25 = (\$78.50 subscription price) / 3the next step is to isolate the subscription price:\$1.25 x 3 = \$78.50 subscription price\$3.75 = \$78.50 subscription pricesubscription price = \$78.50 - \$3.75subscription price = \$74.75