Which one of the following events is considered part of the expected return on Fido stock?
A) The president of Fido suddenly announced that the firm is going to cut production effective immediately.
B) The government just announced a tax cut which will directly impact the sales of Fido.
C) The management of Fido announced their ten-year plan for expansion five years ago.
D) The price of Fido stock suddenly dropped due to rumours concerning company fraud.
E) Fido just won a major government contract which they had not anticipated winning.

Question

Quizplus · Accepted Answer

Expected return on a stock includes all information that is already known and has been factored into the stock's price. The announcement of Fido's ten-year plan for expansion five years ago is an example of such information, as it has been public for a significant period and presumably has been considered by investors in their valuation of the stock.

Which One of the Following Events Is Considered Part of the Expected