Ace Pharmaceutical Announced FDA Approval for a New Drug on December

question 82

Multiple Choice

Ace. Pharmaceutical announced FDA approval for a new drug on December 3. West Drug Co. announced approval for its new drug on December 5. No other information was released that would affect returns over the period. What is the combined cumulative abnormal return for the five-day period commencing two days prior to the approval announcement date? Use the following data to answer this question. No trading occurred on December 6 and 7.
$\begin{array}{rrrr}\text { Date}& \text {Market}& \text { Ace Return }& \text {West Returr }\\1 \text {-Dec } & .30\% & .10\% & .10\% \\2 \text {-Dec } & .20\% & .20\% & -.20\% \\3 \text {-Dec } & .10\% & .70\% & .30\% \\4 \text {-Dec } & .00\% & .50\% & .20\% \\5 \text {-Dec } & -.10\%& -.40\%& .40\% \\8 \text {-Dec } & .10\% & -.30\% & -.10\% \\9\text { -Dec } & -.20\% & -.10\% & -.20\%\end{array}$

• A).6%
• B)1.0%
• C)1.1%
• D)1.2%
• E)1.3%

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