Consider that there is a strong form of efficiency in the markets.A pharmaceutical company announces that it has received Federal Drug Administration approval for a new allergy drug that completely prevents hayfever. The consensus analyst forecast for the company's earnings per share (EPS) is $5.00, and insiders agree with analyst expectations. They tooexpect that, with this new drug, earnings will drive the EPS to $5.00. What will happen when the company releases its next earnings report?O The stock price will not change, because the market already incorporated that information in the stock price when the announcementabout FDA approval was made.O There will be some volatility in the stock price when the earnings report is released; it is difficult to determine the impact on the stockprice.O The stock price will increase and settle at a new equilibrium level. 8. The efficient markets hypothesisTrue or False: The efficient markets hypothesis holds only if all investors are rational.O FalseO TrueAlmost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial marketsdetermines the ability of investors to "beat" the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, theywill react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflectwhat information is incorporated in stock prices.Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement:Current market prices reflect all relevant information, whether it is known publicly or privately.This statement is consistent with:O Semistrong form efficiencyO Strong form efficiencyO Weak form efficiency

We know the principle of technical analysis. Market Discount everything- What information is…

A pharmaceutical company announces that it has received Federal Drug Administration approval for a new allergy drug that completely prevents hay ever. The consensus analyst forecast for the company's earnings per share (EPS) is $5.00, and insiders agree with analyst expectations. They too expect that, with this new drug, earnings will drive the EPS to $5.00. What will happen when the company releases its next earnings report? O The stock price will not change, because the market already incorporated that information in the stock price when the announcement about FDA approval was made. O There will be some volatility in the stock price when the earnings report is released; it is difficult to determine the impact on the stock price. O The stock price will increase and settle at a new equilibrium level.

A pharmaceutical company announces that it has received Federal Drug Administration approval for a new allergy drug that completely prevents hay ever. The consensus analyst forecast for the company's earnings per share (EPS) is $5.00, and insiders agree with analyst expectations. They too expect that, with this new drug, earnings will drive the EPS to $5.00. What will happen when the company releases its next earnings report? O The stock price will not change, because the market already incorporated that information in the stock price when the announcement about FDA approval was made. O There will be some volatility in the stock price when the earnings report is released; it is difficult to determine the impact on the stock price. O The stock price will increase and settle at a new equilibrium level.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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