Under the Efficient Markets Hypothesis, What Will Be the Percentage

question 14

Multiple Choice

Under the efficient markets hypothesis, what will be the percentage change in the stock price of a company whose current dividend is $10.00 and whose dividends had been expected to grow by 3% per year but now are expected to grow by 1% per year?

• A)-4.0%
• B)-23.7%
• C)-31.1%
• D)-66.0%

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Definitions:

Prevail

To be widespread or dominant, or to win against opposing forces.

Concentration Ratio

A measure used in economics to assess the extent of market control held by the largest firms within an industry.

Profit-maximizing Output

The level of production at which a firm achieves the highest possible profit, where marginal cost equals marginal revenue.

Total Cost

The sum of all costs required to produce a certain amount of a good or service, including fixed and variable costs.