Suppose That Interest Rates Unexpectedly Rise and That FineLine Corporation

question 70

Multiple Choice

Suppose that interest rates unexpectedly rise and that FineLine Corporation announces that revenues from last quarter were down but not as much as the public had anticipated they would be down.According to the efficient markets hypothesis,which of the these things make the price of FineLine Corporation Stock fall?

• A)both the interest rate rising and the revenue announcement
• B)neither the interest rate rising nor the revenue announcement
• C)only the interest rate rising
• D)only the revenue announcement

---

Definitions:

Interim Financial Statements

Financial reports covering a period of less than a full fiscal year, often quarterly.

Full Disclosure

A principle requiring that all material facts and information related to financial transactions be disclosed in financial statements.

Conservatism Principle

An accounting principle that advises reporting expenses and liabilities as soon as possible, but revenue only when it is ensured.

Gross Profit Method

An inventory valuation method used to estimate the cost of goods sold and ending inventory levels by applying a gross profit margin to sales.