1. To determine the value of a rights offering, the stockholder needs to know the following two pieces of information in addition to the current stock price:

A. the subscription price and the number of rights needed to acquire a new share.

B. the amount of new equity to be raised and the number of rights needed to acquire a new share.

C. the amount of new equity to be raised and standby fee.

D. the detachment date and the subscription price.

E. None of these.

2. In a certain collateralized mortgage obligation (CMO) issue, $60,000 of senior securities (Tranche A), $30,000 of mezzanine securities (Tranche B), as well as $10,000 of junior securities are issued (Tranche C). The issuer’s overcollateralization is $10,000, and the total duration of the CMO is 5 years in the absence of prepayment. The coupon on the senior securities is 5%, the mezzanine 6%, and the junior tranche 9%. The average contractual interest rate on the underlying mortgage pool is 8%. What is the Weighted Average Coupon (WAC) for this issue?

6.0%

5.7%

6.7%

5.5%