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Introduction to Financial Markets (405) — CBSE Class 10 board question

Q1. [1] § 3.1 Issue of Shares
Jaykant Shikre owns one hundred shares of a company. He has been given a special offer to subscribe to a new issue of shares from the same company at a ratio 2 : 1 based on the number of shares he currently holds. What method of flotation is being described in this case ?
  1. (A) Initial public offer
  2. (B) Offer for sale
  3. (C) Rights issue
  4. (D) Private placement
Previously asked in CBSE board exam
2026 92 Q2 (iii)
Generated by claude-sonnet-4-6 · 2026-06-15 07:06 · grounding rag
Model Answer

(C) Rights Issue

A Rights Issue is when a listed company offers fresh securities to its existing shareholders in a fixed ratio to shares currently held. Jaykant holds 100 shares and is offered new shares at 2:1, which matches this definition exactly.

Source: Chapter 3, Issue of Shares — Rights Issue

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Explanation

The key clue is "existing shareholder" + "fixed ratio (2:1) based on shares currently held" — this is the defining feature of a Rights Issue. IPO is for unlisted companies; Offer for Sale and Private Placement do not involve existing shareholders receiving a proportional offer. Examiners expect you to identify the method and give a one-line justification.

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