In an Efficient Market When a Firm Makes an Announcement

question 62

Multiple Choice

In an efficient market when a firm makes an announcement of a new product or product enhancement with superior technology providing positive NPV, the price of the stock will:

• A)rise gradually over the next few days.
• B)decline gradually over the next few days.
• C)rise on the same day to the new price.
• D)stay at the same price, with no net effect.
• E)drop on the same day to the new price.

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Definitions:

Rank Order

A rating scale providing a series of statements that the respondent is asked to place from highest to lowest based on his or her preferences.

Magnitude

The size, extent, or importance of something, often measured in terms of its scale, intensity, or impact.

Internal Consistency Reliability

A measure of how well the items on a test measure the same construct or concept, indicating the test's reliability.

Standard Score

A statistic that indicates how many standard deviations an element is from the mean in a normal distribution.