A pharmaceutical company unexpectedly announces that it just developed an important new drug.This news should
A)raise the price of the corporation's stock;if it does not the stock is overvalued.
B)raise the price of the corporation's stock;if it does not the stock is undervalued.
C)reduce the price of the corporation's stock;if it does not the stock is overvalued.
D)reduce the price of the corporation's stock;if it does not the stock is undervalued.

Question

Quizplus · Accepted Answer

The announcement of an important new drug is generally seen as positive news for the pharmaceutical company. It is expected that this news would increase the company's profits and revenue, which in turn would increase the value of the company and its stock. Therefore, the price of the corporation's stock should go up. If it does not, it could indicate that the stock is undervalued and therefore a good investment opportunity.

A Pharmaceutical Company Unexpectedly Announces That It Just Developed an Important