In an efficient market when a firm makes an announcement of a new product or product enhancement with superior technology providing positive NPV,the price of the stock will:
A) rise gradually over the next few days.
B) decline gradually over the next few days.
C) rise on the same day to the new price.
D) stay at the same price, with no net effect.
E) drop on the same day to the new pricE.

Question

Quizplus · Accepted Answer

In an efficient market, the price of the stock will adjust immediately to reflect the positive NPV of the new product or product enhancement with superior technology. This means that the price will rise on the same day to the new price. The other options are not consistent with the efficient market hypothesis.

In an Efficient Market When a Firm Makes an Announcement