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.

---

Definitions:

Inflation

A measure of the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Consumer Goods

Physical products purchased by consumers for personal or household use.

Technology

The application of scientific knowledge for practical purposes, especially in industry and improvements in tools, machines, techniques, and software.

Productivity

Productivity measures the efficiency of production, often quantified as the ratio of output produced to the input used in the production process.