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.

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Definitions:

Foot-In-The-Door Technique

A compliance method where persuading someone to agree to a small request increases the likelihood of agreement to a larger request later.

Solicitor

A legal professional qualified to offer advice and represent clients in legal matters, primarily in jurisdictions such as the UK, Ireland, and Australia.

Chain-Of-Command

The hierarchy within an organization that establishes who is in charge of whom and of whom permission must be asked.

Status Generalization

The process by which attributes of individuals, unrelated to a particular situation, influence the formation of status hierarchies within groups.