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

Question

Quizplus · Accepted Answer

The announcement of hiring a new CEO believed to raise profitability would tend to make the stock price rise due to increased investor confidence. In contrast, a rise in interest rates generally makes borrowing more expensive and can dampen economic activity, which might negatively affect stock prices.

An Automobile Manufacturer Unexpectedly Announces That It Has Hired a New