Under Which of the Following Conditions Would a Firm's Stock

question 40

Multiple Choice

Under which of the following conditions would a firm's stock price rise following an interest rate hike by the central bank?

• A) the firm simultaneously announces a poor profit report
• B) the rate hike was fully anticipated by the market
• C) investors perceive the rate hike as a response to rapid inflation
• D) investors had expected an interest rate decrease
• E) market participants had anticipated a larger increase in rates than actually occurred

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Definitions:

Heads

One of the two possible outcomes when flipping a standard coin, the other being tails.

Chi-Square Distribution

A statistical distribution that is used to describe the distribution of a sum of the squares of k independent standard normal random variables, useful in hypothesis testing and constructing confidence intervals.

Degrees Of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution or to a system without violating any constraints.

Left-Tailed Area

Refers to the area under the probability distribution curve to the left of a specified value, often used in hypothesis testing to determine significance.