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2. ABC textile has 10,000 shares outstanding at Tk. 50 each. They expect to raise Tk.
200,000 by a rights offerings with a subscription price of Tk. 40. How many rights must
you turn in to get a new share?
3. ABC textile has 10,000 shares outstanding at Tk. 50 each. Last week, the firm issued
rights to raise new equity. To purchase a new share, an existing shareholder must remit
Tk. 40 and 2 rights. What is the ex-right price? What is the value of one right?
4. BAA company plans to issue Tk. 1 million of bonds with coupon rate of 10% and 10 year
to maturity. The current market interest rate is 10%. After 1 year, the interest rate on the
bond could be either 15% or 5% with equal probability. Assume investors are risk
neutral.