In Which of the Following Situations Is an Event Study

question 24

Multiple Choice

In which of the following situations is an event study most likely to be useful?

• A)a study designed to determine the effect that recessionary fears have had on charitable contributions during a period when the CEO of one of the largest charities has been
• Indicted for fraud
• B)a study designed to determine what effect the completion of a merger agreement that was announced at least 18 months prior would have on the price of the acquiring firm today
• C)a study designed to determine what effect the announcement of a new patent has on the stock price of a firm
• D)a study designed to determine what effect the arrest of a famous actress or actor will have on the aggregate value of the stock market

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Definitions:

Capital Stock

The total value of all durable goods available for use in production, including machinery, buildings, and equipment.

Increase

A situation where there is a rise in quantity, size, number, value, or intensity of a particular economic variable or element.

Sub-Prime Loan

A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans, usually because of poor credit histories.

Prime Rate

Rate of interest that banks charge their most creditworthy customers.