Semi-strong form of market efficiency

Assignment Help Financial Management
Reference no: EM13883146

Geothermal Corporation issued a press release before the stock market opened announcing that its earnings are above last year’s earnings. Explain how each of the following individual scenarios could be consistent with the semi-strong form of market efficiency.

(a) When trading opened after the announcement, the stock price quickly decreased by 20%.

(b) The stock price of Geothermal increased slowly over the 30 days before the announcement that earnings were higher than last year.

 

(c) The stock price decreased by 10% immediately following the announcement but then increased throughout the day so that the closing price was only 2% below the previous day.

Reference no: EM13883146

Questions Cloud

Administrative law agencies usually have types of authority : The duties of an agent to her principal are loyalty, obedience, performance and which of the following: Administrative law agencies usually have three types of authority.
Calculate the cost of fuel of conventional energy system : Calculate the cost of fuel of a conventional (non-solar) energy system for 12 years, if the total annual load is 152 GJ and the fuel price is $14/GJ, the market discount rate is 8%, and the fuel inflation rate is 5% per year.
The initial cost of solar energy system : The initial cost of a solar energy system is $14,000. If this amount is paid with a 30% down payment and the balance is borrowed at 8% interest for 12 years, calculate the annual payments [A] and interest charges [B] for a market discount rate of 6%...
Cost straight-line to zero over the projects life : Dahlia Enterprises needs someone to supply it with 117,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. If your tax rate is 30 percent and your required ret..
Semi-strong form of market efficiency : Geothermal Corporation issued a press release before the stock market opened announcing that its earnings are above last year’s earnings. Explain how each of the following individual scenarios could be consistent with the semi-strong form of market e..
Suppose you create portfolio by holding : Suppose you create a portfolio by holding 100 shares of McDonald’s stock, writing a call option on the stock with an exercise price of 55 and one year to expiration and writing a put option on the same stock with an exercise price of 25 and one year ..
What should current rate be on two year treasury securities : One-year Treasury bills currently earn 3.85 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 4.05 percent. The liquidity premium on 2-year securities is 0.10 percent. If the liquidity theory is correct, what sho..
Pricing model to find the value of a call option : Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/£. Th..
Make debate and discussion more productive : It can be easy to dismiss those who disagree with you as uninformed. How does understanding the different world view of someone who disagrees with you make debate and discussion more productive?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the annual opportunity cost of a checking account

What is the annual opportunity cost of a checking account that requires a $300 minimum balance to avoid service charges? Assume an interest rate of 3%.

  How much of this will be debt and equity

Compute the weighted average cost of capital on the first $250 million of funds and saven Travel will need to raise $150 of additional capital for expansion. How much of this will be debt and equity?

  An investment project costs

An investment project costs $15,000 and has annual cash flows of $3,800 for six years. What is the discounted payback period if the discount rate is 0 percent? What if the discount rate is 10%? If it is 15%? (Please show math)

  New shares and other operating improvements

Allen Lumber Company had earnings after taxes of $500,000 in the year 2009 with 420,000 shares outstanding on December 31, 2009. On January 1, 2010, the firm issued 25,000 new shares. Because of the proceeds from these new shares and other operating ..

  Create journal entries

On Dec 7, Star Wars Inc. received ac check in the amount of $49,294 from C3PO Co. in full payment of a sales invoice dated Nov. 27 for $50,300. On Dec 10, Star Wars, Inc. received payment of $72,863 from Jabba's Huts, Inc. in full payment of an invoi..

  Dollar gain and loss relative to the price of the bond

Three years ago, you invested in a zero coupon bond with a face value of $1,000 that had a YTM of 11.5% and 14 years left until maturity. Today, that bond has a YTM of 6.5%. Due to a financial emergency, you are forced to sell the bond. What is your ..

  Evaluation of the models and concepts

Prepare a report on evaluation of the models and concepts proposed outlining their limitations and merits.

  Purchase equipment by issuing new securities

The Fried Green Tomato Restaurant increased its operating cycle from 140 days to 148 days while the cash cycle decreased by 3 days. How have these changes affected the accounts payable period? Quali Tech wants to raise $21 million to purchase equipme..

  Which is expected to grow at a constant rate

B&B currently has free cash flow of $24  million, which is expected to grow at a constant rate of 5%. B&B's financial statements  report marketable securities of $100 million, debt of $200 million, and preferred stock of  $50 million. B&B's WACC is 1..

  Expansion project-requires an initial fixed asset investment

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.73 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..

  Explain the degree to which the existing benchmarks align

Explain the degree to which the existing benchmarks align with existing organisational goals. Propose improvements which would better align benchmarks as needed.

  Determine the range of annual cash inflows

Sensitivity analysis James Secretarial Services is considering the purchase of one of two new personal computers, P and Q. Both are expected to provide benefits over a 10-year period, and each has a required investment of $3,000.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd