If Stock Prices Are In-Line with Their Fundamental Determinants and Interest

question 9

Multiple Choice

If stock prices are in-line with their fundamental determinants and interest rates do not change, then a change in the profit expectations by 20%

• A)will change the stock price by exactly 20% regardless of the expected distribution of the earnings over time.
• B)will change the stock price by less than 20% regardless of the expected distribution of the earnings over time.
• C)will change the stock price by more than 20% regardless of the expected distribution of the earnings over time.
• D)will change the stock price by more or less than 20% depending on the expected distribution of the earnings over time.

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Definitions:

New Businesses

The act of founding, starting, and nurturing new companies or ventures.

Fraud

The intentional deception or misrepresentation made by an individual or entity for personal gain or to damage another.

Deception

The act of misleading or lying to others, creating false impressions or beliefs, often used to achieve personal gain or to hide something.

Embezzlement

The act of withholding assets for the purpose of conversion of such assets, by one or more individuals to whom the assets were entrusted.