Asked by Katelyn Nartiff on May 10, 2024
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An automobile manufacturer unexpectedly announces that it has hired a new chief executive officer. It is widely believed that the presence of this individual will raise the profitability of the corporation. At the same time interest rates unexpectedly rise. Which of the above would tend to make the price of the stock rise?
A) The announcement and the rise in interest rates
B) The announcement but not the rise in interest rates
C) The rise in interest rates, but not the announcement
D) Neither the announcement nor the rise in interest rates
Profitability
A measure of how effectively a company generates profit compared to its revenue. It's an indicator of financial health and efficiency.
Chief Executive Officer
The highest-ranking executive in a company, responsible for making major corporate decisions, managing overall operations, and acting as the main point of communication between the board of directors and corporate operations.
Interest Rates
For the use of assets, lenders apply a charge to borrowers, expressed as a proportion of the principal.
- Recognize and comprehend the influence of news and corporate activities on the valuation of stocks within the Efficient Market Hypothesis framework.
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Learning Objectives
- Recognize and comprehend the influence of news and corporate activities on the valuation of stocks within the Efficient Market Hypothesis framework.
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