Two Weeks Ago Acme Electronics Announced That It Had Developed

question 69

Multiple Choice

Two weeks ago Acme Electronics announced that it had developed a new chip design, which was being considered by major companies for use in future smart phone development. At the close of trading the day before the announcement, Acme common stock closed at $20. On the day following the announcement, Acme closed at $21. Two days after the announcement the stock closed at $22.50. Four days after the announcement, the stock traded at $23. Last week, Acme stock traded at $26, a level it has maintained since then. This is an example of a(n) :

• A)overreaction and correction.
• B)underpricing.
• C)delayed reaction.
• D)pre-activity action.
• E)efficient market reaction.

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Definitions:

Hedge Funds

Investment funds that employ various strategies to earn active returns for their investors, often engaging in aggressive tactics and leveraging.

Institutional Investors

Organizations such as pension funds, insurance companies, and mutual funds that invest large sums of money in securities and other investment assets.

Public Companies

Corporations whose shares are publicly traded on stock exchanges, allowing for public ownership.

Acquisition

The process of gaining control or ownership of another company or asset through purchase or merger.