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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Definitions:

Ortolani Sign

A clinical sign used to detect hip dislocation or dysplasia in infants by assessing if the hip can be relocated into the socket.

Adducts

The movement of a limb or other part toward the midline of the body or toward another part.

Swan-neck Deformity

A condition characterized by hyperextension of the proximal interphalangeal joint and flexion of the distal interphalangeal joint of the fingers, often associated with rheumatoid arthritis.