New Labs Just Announced That It Has Received a Patent

question 49

Multiple Choice

New Labs just announced that it has received a patent for a product that will eliminate all flu viruses.This news is totally unexpected and viewed as a major medical advancement.Which one of the following reactions to this announcement indicates the market for New Labs stock is efficient?

• A)The price of New Labs stock remains unchanged.
• B)The price of New Labs stock increases rapidly and then settles back to its pre-announcement level.
• C)The price of New Labs stock increases rapidly to a higher price and then remains at that price.
• D)All stocks quickly increase in value and then all but New Labs stock fall back to their original values.
• E)The value of all stocks suddenly increase and then level off at their higher values.

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Definitions:

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders, and offers limited liability protection to them.

Partnership

A business organization where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed.

Cash Inflows

The total amount of money received by a company from its various business activities, including sales, financing, and investments, during a specific period.