How would expect the price of a share of stock to react

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Problem 1: Assume that markets are semi-strong form efficient. Suppose, then, that during a trading day, important new information is released for the first time concerning a certain company. This information indicates that one of the firm's oil fields, previously thought to be very promising, just came up dry. How would you expect the price of a share of stock to react to this information?

a. The value of a share will fall over an extended period of time as investors begin to sell shares in the company.

b. The value of a share will drop immediately to a price that reflects the value of the new information.

c. The value of a share will fall below what is considered appropriate because of the decreased demand for the shares, but eventually the price will rise to the correct level.

d. The value of a share will rise over a long period of time as investors sell the stock.

e. The stock price will not change since this type of information has no impact in markets that are semi-strong form efficient.

Reference no: EM132653356

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